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TELECOM EQUIPMENTS INDUSTRY |
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TELECOM EQUIPMENTS INDUSTRY |
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Introduction It is universally agreed that telecommunications contributes significantly to the overall socio-economic development of the country, and that the development of a modern nation to its full potential in the contemporary world can never be attained without modern telecommunication services. Developing a modern, reliable and robust telecommunication system needs availability of state-of-the-art telecommunication equipment. For a cost sensitive market like India, it is important to make available telecom equipment at a cost which would help build networks that can sustain large volumes at low per user revenues. This could be achieved through innovation and large scale manufacture of products based on new technologies that would help build cost effective networks. Types of equipments Telecommunication equipments may be broadly classified into the following categories-
Global scenario Almost all countries in the world are manufacturing telecommunication equipments. The Revenue of top 10 global telecom equipment companies by 2013 is depicted in the following table: Table - 1 Top 10 Global Telecom equipment companies by Revenue as of 2013
Source: www.statista.com. Table - 2 Global Revenue from telecom equipment from 2005 – 2016
Source: www.statista.com This statistic shows the total amount of revenue made worldwide from telecommunications equipment sales from 2005 to 2012, and also offers a forecast for 2013 and 2016. In 2007, revenue from telecommunications equipment came to 222 billion euro. Indian scenario The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecom equipment manufacturing only. The Indian telecom industry manufactures a vast range of telecom equipment using state-of-the-art technology. The last five years saw many renowned telecommunications companies setting up manufacturing bases in India. Favorable factors such as facilitative polices, large talent pool in research and development and low labor cost can provide an impetus to telecom manufacturing industry in the country. The National Telecom Policy 2012 proposed to promote the ecosystem for design, Research and Development, IPR creation, testing, standardization and manufacturing i.e. complete value chain for domestic production of telecommunication equipment to meet Indian telecom sector demand. The department is working in coordination with Department of Electronics and Information Technology (DeitY) for this cause. One of the missions of National Telecom Policy, 2012 is to make India a global hub for telecom equipment manufacturing and a Centre for converged communication services. One of the objectives of the Telecom policy is to provide preference to domestically manufactured telecommunication products, in procurement of those telecommunication products which have security implications for the country and in Government procurement for its own use, consistent with our World Trade Organization (WTO) commitments. With the advent of next-generation technologies and 3G and Broadband Wireless Access Services rolled out by operators, the demand for telecom equipment has increased. In an attempt to capitalize on this opportunity, the government and policymakers are focusing on developing the domestic manufacturing industry. The Indian equipment manufacturing sector has come a long way in the past few years. From being an import-centric industry, it is slowly but steadily moving towards becoming a global telecom equipment manufacturing hub. TRAI is in the process of formulating the recommendations for encouraging domestic telecom equipment manufacturing. While regulator has issued a number of issues including fiscal incentives and encouraging R&D, the question over mandating purchase of local equipment has drawn divided views. One view is that the Government should mandate at least 70% of the domestic telecom procurement needs are earmarked for Indian products. Where Indian products are not available operators must use products that are manufactured in India. In all strategic projects of national importance or with security concerns, only Indian products should be used. GSM operators are not in favor of any regulations in this regard. It may be a counter productive and may retard the growth of the Indian telecom industry. FDI policy 100% participation of FDI is allowed in respect of manufacture of Telecom equipments under automatic route since 1990. Equipment production The exponential growth witnessed by the telecom sector in the past decade has led to the development of the telecom equipment manufacturing and other supporting industries. In 2002-03, India produced telecom equipment worth ₹ 144000 million, which increased to ₹ 520000 million in 2010-11, registering a growth of 265 per cent. Table - 3 Telecom Equipment Production
Source: DoT Annual Report The above table shows the increasing trend in the manufacture of telecom equipments. The highest growth is noticed during the year 2007 – 08 when compared to the figures of other financial year. Import and Export of equipments The export of telecom equipment has consistently increased till 2012-13. It has increased with the CAGR of 43% to reach ₹ 21,075 crore in 2012-13 from ₹ 402 crore in 2002-03. In the year 2006-07, India exported equipment worth ₹ 18980 million, which increased by over 730 per cent to ₹ 158380 million in 2011- 12. However, the export figures has slightly declined in 2013-14 to reach ₹ 19,579crore. The year wise telecom export figures are given in the following table; Table - 4
Source: www.telecompec.in The following table will depict the equipment wise export for the year 2012 – 13 and 2013 – 14: Table - 5 Export of Telecom equipments including mobile phones, parts and telecom cables
Source: DGFT web-site The import of telecom equipments in India for the year 2011-12 is ₹ 531020 million; for the year 2012-13 is ₹ 559933 millions; for the year 2013-14 is ₹ 685093 millions and for the period from April 2014 to October 2014 is ₹ 523105 millions. The following table will depict the equipment wise import for the year 2012 – 13 and 2013 – 14: Table - 6 Import of Telecom equipments including mobile phones, parts and telecom cables
Source: DGFT web-site The above table depicts that rate of import is increasing for the period 2013 – 14 than 2012 – 13. The objective of the Government is to balance the import and export and then to obtain the positive result in exporting more equipment in future. International co-operation With a view to promote R&D, IPRs, Standardization, Product development and manufacturing of telecom equipment and services including their exports, Government have facilitated setting up following societies:
Telecom Equipment & Services Export Promotion Council (TEPC) Telecom Equipment & Services Export Promotion Council (TEPC) as a Council plays a critical role in furtherance of Telecom Exports from the Country and assists its member companies in easy facilitation of their respective exports. The Council caters to the complete Telecom Ecosystem including Telecom Hardware Manufacturers, Telecom Service Providers, Telecom software vendors and consultants. TEPC achieved in Inclusion of telecom products under 5% duty credit scrip of Focus Product Scheme (FPS) Public Notice No. 53 (RE 2013)/2009-14 dated 27th February 2014 Statistics on some telecom equipments Among several telecom equipments the statistical details of some equipment are furnished as detailed below: Smart phone Google in its research found that women are leading the usage of smart phones over TV sets, since they are more entertainment than TVs. 56% of Indians find their smart phones more entertaining than the TV. In comparison with other countries such as US (21%), UK (18%) or even neighboring nations come nowhere close to India’s enthusiasm. The smart phone evolution is waiting to happen. Table - 7 Market share of Smart phone companies in India
Source: International Data Corporation According to IDC 265 million smart phones were sold in India during the quarter ended June 2015. Table - 8 Market share of tablets companies in India
Source: International Data Corporation According to IDC 1.04 million tables were sold during the quarter ending June 2015 in India. The revenues of tablet market in India are expected to be registered CAGR of 33% by 2018. Demand for equipments Since the telecom industry is penetrating in Rural itself the demand for equipments like mobile handsets and other equipments for the provision of telecom services is increasing. The following table will depict the global demand, Indian demand, the percentage of Indian demand of that of Global for the years from 2007 – 08 to 2019 – 20. Table - 9 Telecom Equipment demand in India
Source: www.trai.gov.in The following table depicts the demand and total production up to the year 2013 – 14 and the projected demand and production up to the year 2019 – 20. The figures show that the total production of equipment will overtake the demand. Table - 10 Potential for Domestic Production
Source: www.trai.gov.in Used telecom equipment As telecommunications equipment technology rapidly evolves, operators are being forced to look at used and refurbished telecommunications equipment for alternative, cheaper options to maintain their networks. The used telecommunications market has expanded rapidly in the last decade with used and refurbished equipment offering cheaper equipment supply, offering legacy and end of life equipment being refurbished to support platforms already being used by global telecom operators. As equipment is discontinued, operators and end users often look for sparing as parts become harder to source. e-waste management With consumers frequently changing their mobile handsets etc., the e-waste management business will gain significance for the industry. Certain components of electronic devices are hazardous, and need proper disposal. The current disposal process are primitive and can impact the ecology by poisoning ground water, flora and fauna, etc., There is a mechanism for properly disposing of these waste products, wherein they are brought to a central location and disposed scientifically by conversion into other products. All mobile phones should be free of brominates and chlorinated compounds by 2015. This will be in accordance with the e-waste (Management and Handling) Rules, 2010. Mobile manufacturers/distributors will be required to place collection bins at appropriate places for the collection of e-waste. This includes mobile phones, batteries and charges. E-waste should be safely disposed of or recycled as per the prevailing standards. Challenges In the euphoria of high growth in services, the manufacturing of telecom equipment received the least priority. While a liberal trade policy enabling import of equipment with low or no duty kept both service providers and consumers happy, the lack of capacity building for domestic production poses a serious challenge to India’s continued success in the telecom sector. The security consideration is also another challenge that India should aim achieving self sufficiency in telecom equipment. Apart from the above sector specific constraints, manufacturing in India is besieged with numerous generic problems, such as poor infrastructure, high input costs, low productivity, high taxes and rigid regulations, more particularly in labor matters. Conclusion The demand supply gap and the imbalance between the exports and imports of the telecom equipment provide a good opportunity for manufacturing of telecom equipment in India both by the global companies as well as the Indian product companies. Insofar as the gap between imports and exports are concerned, there is scope for increasing manufacturing of telecom equipment not only to meet its own requirements. There is no doubt that equipment manufacturing can play a crucial role in the overall success of the Indian telecom sector and therefore domestic manufacturing must be promoted. Reference: 1. www.dot.gov.in. 2. www.trai.gov.in. 3. www.statista.com. 4. Annual Reports of Department of Telecom. 5. www.tematelecom.in. 6. http://en.wikipedia.org. 7. tele.net journals.
By: Mr. M. GOVINDARAJAN - February 14, 2017
Discussions to this article
Very nice article. Lot of informations covered. Thanks for sharing sir.
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