India headed for hardware boom

The country is waking up to a hardware manufacturing boom. Over the last 18 months, investments worth $18 billion (around Rs 80,000 crore) have been committed by major global players in the electronics, IT and telecom sector (hardware manufacturing or chip design or research and development or developing software products) in the country.

The Indian government expects a fresh commitment of about $2 billion over one year in telecom manufacturing alone, according to Dayanidhi Maran, Union minister of communications and information technology.

The kind of growth the government has targeted to achieve by 2010 is expected to attract investments of about $20 billion, churning out more jobs, contribution to GDP and increased government revenues.

The money committed is already showing results. In less than a year of operations, Nokia's factory at Sriperumbudur (near Chennai) alone has manufactured over 20 million mobile handsets. Lektela, director of operations, Nokia India, said, "India is expected to be the second-largest market for Nokia in terms of volumes by 2010."

And it is not just mobile phones. Falling prices are fuelling demand for personal computers as well. The average price of a computer has dropped to $225 from $500 in 2004. Driven by demand in the government and mid-sized segment, the PC market "� desktops and notebooks taken together "� sold 5.04 million units in 2005-06, a growth of 32 per cent over the previous financial year.

Desktop sales are expected to cross 5.6 million units in 2006-07, while overall PC shipments will exceed 6 million units, according to the Manufacturers Association for Information Technology.

A report by Indian Semiconductor Association-Frost & Sullivan indicates that electronics consumption in the country was around $28 billion in 2005, which formed just 2.5 per cent of global market. However, the country consumption of electronic equipment, the report states, is expected to reach $126.7 billion by 2010 and $363 billion by 2015, growing at a CAGR of 29.8 per cent.

It is the burgeoning domestic market that has attracted the 'Who's Who' of the world of ICT (information and communication technology ) players here. US chipmaker Advanced Micro Devices (AMD) plans to set up the country's first chip fabrication factory (or "fab") at an investment of about $3 billion.

AMD's competitor Intel has announced a multi-year investment plan for business expansion in the country, totalling over $1 billion, including $800 million over five years. IBM also announced its plans to triple its investment in India by pumping in $6 billion.

The visits of top officials of AMD, Intel, Lenovo, Microsoft, Dell and Motorola to India were a clear and loud signal that the country is finally on its way into the global hardware arena.

Besides, global majors such as Cisco, Motorola, Dell, Nokia, Flextronics, LG, Siemens, Foxconn and Aspocomp have already lined up or announced plans for large investments for India in hardware manufacturing.

Rajan Anandan, vice-president and general manager, Dell India, said the company was bullish on the country and was expecting to grow over 60 per cent.

Dell is setting up a unit at Sriperumbudur at an investment of $30 million in order to cut shipment and production costs. While HP and Dell are expanding aggressively, the Chinese PC-maker Lenovo is planning to expand capacity from 600,000 units to 1 million a year at its facility in Pondicherry.

Domestic giant HCL Infosystems is planning to hike production capacities for all its products (including desktops and notebooks) to 2 million units by the end of next year from the present 1.2 million.

Domestic manufacturing will also mean availability of mobile handsets and personal computers at cheaper prices. Mobile handsets at prices lower than Rs 1,000 are expected to hit the market during 2007.