Manufacturing Communications Technology Products in India
By Petra Ebner and Arno Kolk, Elcoteq SE

WiMAX (Worldwide Interoperability for Microwave Access) is one of the fastest growing wireless broadband technologies, and India is the world’s fastest growing wireless telecommunications market. This combination results in a fertile market for volume manufacturing of communications technology products in India. Although original equipment manufacturers (OEMs) might be positioned to enter this market, they may look at the infrastructure of India and what it entails to setup a manufacturing operation and be hesitant to make the move. However, working with an electronics manufacturing services (EMS) company that is already established in India and expert in communications technology products can make the decision to move volume manufacturing to India a lot more desirable.

India is a huge market with a local supply chain. This was not the case in 2004 when Elcoteq announced it was expanding its facilities with a plant to manufacture communications technology products in Bangalore, but as OEMs and EMS companies moved in, the supplier base has improved. OEMs are looking for several things in order to be successful manufacturing WiMAX and communications technology-related products in India. These include technology expertise, sourcing, a global footprint, design support, and asset management.

Many communication network products, such as wireless and wireline infrastructure products and equipment for enterprise networks, are being manufactured by EMS companies. For wireless infrastructure products, the range includes cellular base stations, microwave systems, plug-in units for mobile base stations, and antennas. Examples of wireline infrastructure products are ADSL multiplexers and other broadband network products and enterprise network products, such as switches for data networks. The WiMAX product mix ranges from customer premises equipment (CPEs) to remote radio heads (RRHs) and complete WiMAX base stations. Some of these products, like WiMAX base stations, need lower volume manufacturing, while others, like CPEs, require high volume manufacturing.

Technology expertise in these areas requires years of experience and a substantial investment in engineers who specialize in RF and microwave frequencies and their challenges. Meeting the high performance standards expected from these complex, high frequency products requires precision manufacturing capabilities and an advanced level of test capabilities.
To set up a manufacturing plant involves a major investment in capital equipment. Besides assembly equipment, when working at these high frequencies, test and measurement equipment become more complex and expensive.

Component sourcing is another major issue to consider before deciding to manufacture in India. Where the parts are obtained can alter not only their purchase price, but also the price to have them delivered to the manufacturing site in India, the time it will take to get the parts, inventory demands, and possible tariffs for parts that have to be imported. If those parts are available in India, a company must determine the reliability of the source, the quality of the parts, and quantity and delivery issues.

Sourcing is another reason for using an established EMS company for manufacturing in India, especially an EMS that concentrates on a particular OEM’s products. For telecommunications and communications networking products, sourcing has to include items like WiMAX chipsets, RF mechanics, and rack or case mechanics. EMS companies specialize in sourcing, so they tend to be more familiar with the suppliers, have vetted them, and know which ones can produce the quantities needed and deliver them on time. They usually buy in quantity, so they can take advantage of volume discounts. Because they use millions of components, they know which have the best quality and what will work best in various designs and under various conditions. Having a local supply network can save a lot of time and money and reduce cost of ownership.

Partnering with a company that can do volume manufacturing in India, but that has a global footprint, can be quite advantageous. Having a location in India gives a company an understanding of local legislation and the impact that legislation could have on the manufacturing process and the finished products.

OEMs in India need local design support services, especially if they are designing their products for the local India market. Creating the designs and prototypes locally provides flexibility in adapting to market preferences and enables the designers to work in conjunction with manufacturers in design for sourcing, logistics, assembly, test, repair, and the environment.

EMS companies know the standards. India, like many countries, has country-specific requirements. Large carriers also have their own unique wishes, resulting in more product differentiation. A good EMS knows the local requirements, better enabling them to produce these local variants.

A global EMS can help determine the most optimal location for manufacturing your products. They can calculate landed costs for various scenarios, markets and plant locations, and offer the most cost-efficient scenario for each market, taking into account transportation, duties, tariffs, manufacturing costs, component availability, and so on. In addition, generally a global EMS can offer flexibility because they can ramp up quickly, adapt to product changes, accommodate unexpected demand, or move manufacturing to another location if problems arise in India. Having a global footprint with new product introduction (NPI) centers situated closer to the OEM enables the OEM to work with that EMS for design and prototyping, and/or coordinate design and prototyping with design services in India. The EMS can then transfer the process to its India plant for volume manufacturing.

A truly global EMS will use the same equipment, tools, systems and processes no matter where in the world their plant is located. Because the local environmental requirements of each country may not be the same, having a uniform network ensures that the highest global standards will be upheld, no matter where the plant is located, especially for products being manufactured and sold in different regions.

After evaluating the design, manufacturing, sourcing, and logistics aspects of manufacturing in India and analyzing the market potential and demand for your products, much of the decision comes down to asset management. What resources will it take and what working capital will you need to establish and operate a manufacturing plant? Although traditionally EMS companies were thought of only for manufacturing, today not only do they provide complete design to after market services, but they are also experts in managing the entire supply chain and can work with the OEM to create a financing model and resource allocation.

OEMs considering manufacturing and localization in India have nothing to fear. Mechanisms are in place to do volume manufacturing, so now is a good time to do it. India is a high tech country with high tech factories and a maturing WiMAX market. The Indian government has set an agenda for the telecommunications industry and has ambitious growth plans. They have put incentives in place and it is a favorable regulatory environment in terms of patents, copyright laws, and IP protection, especially if you are working with a reputable EMS. Special benefit schemes like Special Economic Zones (SEZ) and Electronic Hardware Technology Park (EHTP) have been introduced, and there is easy access to major international markets and other developing markets such as the Middle East, Pakistan, and East Africa.

Although it is true that the infrastructure in India still needs improvement, several companies have had operations in India for several years and have overcome many of the problems. They have relationships with national and local officials and have established agreements on everything from duties and tariffs to the availability of water and electricity. These companies have gone through the learning curve and ironed out the problems.

The key factor is to look for a large EMS with a major telecommunications focus. They should have a long history in RF and microwave technologies with WiMAX credentials, offer NPI and low volume high mix as well as volume manufacturing capabilities, and have manufacturing plants and a supplier base in the major world markets. The OEM can find technology expertise, sourcing, a global footprint, design support, and asset management in the communications technology market in India.

Elcoteq SE
www.elcoteq.com
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