India has taught us the importance of investing ahead of curve

Written by P P Thimmaya | Updated: Nov 27 2012, 05:38am hrs
Nokia, one of the leading global mobile handset makers, has carried out one of its fastest production ramp-up at its Chennai unit. In the last six years, this unit has produced 600 million devices and is now in the process putting in place a large telecom eco-system in the region. Prakash Katama, director Chennai factory operations, Nokia India, said the firm will continue to add new competencies as he talked about the company's future and the need to create newer manufacturing hubs across the country in an interview to FE's P P Thimmaya. Excerpts.

What has been the progress made by Nokia in India since the start of manufacturing operations in 2005

Nokia was the first firm to set-up a telecom SEZ park and the idea behind it was to not only set-up our manufacturing facility but also to develop and foster a local manufacturing ecosystem. The Chennai unit is one of the world's largest handset manufacturing units and holds the distinction of the fastest production ramp-up across all Nokia facilities. We have invested $285 million till date in our manufacturing unit, which has already produced 600 million devices in its six years of operations. Starting from the very basic phone (Nokia 1110) in 2006, the Chennai factory today manufactures the entire Asha range of phones. It also exports to over 70 countries.

What plans does Nokia have in expanding its manufacturing eco-system in India

Besides providing our employees an opportunity to work on leading mobile technology and address the needs of global markets, we also train them. Overall, Nokia today positively influences about 2,00,000 lives every day, including 50,000 families at the SEZ. We have also helped create employment for women in the region, providing them an opportunity to drive up household income. Today, about 55% of our employees in the Nokia factory are women.

What has Nokia learnt from the India operations

One of the key learnings from our Indian operations and specifically with respect to the Indian manufacturing unit is the importance of investing ahead of the curve.

This was also a reflection of our commitment and belief in the market and our focus on partnering with the telecom revolution underway. Towards this end, we were the first company to set-up a telecom SEZ park.

The idea behind the telecom park was to not only set-up our manufacturing facility but also to develop and foster a local manufacturing ecosystem. Today, the telecom SEZ Park houses four of Nokias global suppliers and component manufacturers including Salcomp, Foxconn, Perlos (name changed to Lite on Mobile) and Wintek. The total employment opportunity (direct and indirect) created through the p ark exceeds 25,000.

What challenges does Nokia confront in running the manufacturing operations in India

We believe that while a lot has been done to improve the overall business climate in Tamil Nadu, there are still a few challenges that need to be addressed, as highlighted in the ICA KPMG report. This includes infrastructural and operational challenges, lack of wider value chain linkages, impact of anomalies in existing tax structure. Under the current taxation structures, legal handset manufacturers are disadvantaged against substandard Chinese imports in the range of 22.5-26.5% on account of multiple taxes. If this is not curtailed immediately then by 2017 it is estimated that the handset manufacturing industry in India will cease to exist and go back to being import-oriented as was the case before 2004.

The government has announced several steps to create manufacturing hubs in the country. What steps are needed to realise this dream

Over the past year, the government has taken a number of steps to grow the countrys manufacturing capabilities and increase the sectors contribution to GDP from the current 16% to 25% by 2025. The National Telecom policy for example addresses in great detail the environment and regulatory issues, labour laws and taxation, as well as pays special attention to the creation of National Manufacturing Investment Zones (NIMZs) in a bid to integrate the industrial infrastructure under one roof and achieve the economy of scale in manufacturing sector to help it grow rapidly. Supported by a host of incentives such as exemption from capital gains tax, liberalised labour and environment norms to promote these zones, the NMP is a positive step towards generating 100 million jobs by 2020. What we now need to focus on is the speed and implementation of these policies.

China has already got the lead on manufacturing. How can India carve a niche for itself

Done right, India has the opportunity to develop a strong component manufacturing ecosystem to realise greater revenues and strengthen overall manufacturing capabilities. According to KPMG, with the expanded capacity in handset manufacturing and the supporting component and design/R&D ecosystem - India has the opportunity to increase handset revenues from R25,000 crore in 2010 to R58,000 crore in 2020.

Component manufacturing by itself is tremendous, specifically in areas such as display, antennas, acoustics, camera module, connectors, battery, plastics & metals, keypads, chargers, semiconductors, passive components, PCBS. Opportunity in these areas range from anywhere between $46 million (chargers) to $2964 million (semiconductors) by 2012.