Telecom Equipment Makers to Get Support from the Indian Government to Facilitate 5G Roll out

Telecom equipment makers to seek support from the Indian government

Major global and Indian telecom equipment makers are expected to meet with telecom ministry officials in December. Taking over the sector and removing bottlenecks will be high on the agenda as the government aspires to spread 5G across India and build an ecosystem for local manufacturing to keep out Chinese stakeholders.

India’s telecom minister Ashwini Vaishnau is said to meet global telecoms equipment makers Nokia, Samsung, Ericsson-owned Jubail and Tata-owned Tejas Networks in December to gauge the government’s ability to support the sector.

The intention to provide a degree of ownership to telecoms equipment manufacturers comes as India is keen to develop its domestic manufacturing ecosystem, boost its 4G and 5G telecom network infrastructure, and alienate Chinese firms over national security concerns. Huawei and ZTE are not welcome to invest in 5G rollout in India.

PLI diagrams for telecom and networking products, design-based manufacturing

Currently, 42 companies, including 28 micro, small and medium enterprises (MSME), have been selected as beneficiaries of the Production Linked Incentive (PLI) scheme in the sector by the Department of Telecommunications (DoT).

While the detailed details of their respective investment plans are yet to be announced, it was reported in early November that local equipment maker HFCL will invest INR 4.25 billion (US$52.03 million) to manufacture equipment under the telecom PLI scheme in the next four years. . In return, HFCL will be eligible for incentives worth INR 6.52 billion (US$79.92 million) to be disbursed from FY 2022-23 to FY 2026-27.

In all, the selected companies have committed to invest ₹41.15 billion (US$503.82 million) under the PLI scheme. Of these, 17 companies, including Nokia, Jabil and Tejas, have applied for an additional 1 percent incentive under the PLI criteria submitted for 5G design-led manufacturing.

India is keen to upgrade its telecom services to the 5G standard and selected telecom equipment manufacturers have reportedly increased their investments under the PLI scheme by more than INR 5 billion (US$61.21 million).

In February 2021, DoT announced the PLI scheme for telecom and network products, with a budget of INR 121.95 billion (US$1.49 billion) to be disbursed over a period of five years. The PLI scheme was revised in April this year to introduce 5G design-led manufacturing standards with an additional incentive of 1% over existing incentive rates.

Out of the budgeted INR 121.95 billion, INR 40 billion (US$489.74 million) has been earmarked for this additional PLI stimulus. Newly selected applicants and existing beneficiaries who applied for the additional incentive under the design-led manufacturing criteria have fully committed to an investment of INR 7.7 billion (US$94.27 million).

Overall, the government estimates the telecom PLI plan to generate additional sales of INR 2.45 trillion (US$29.99 billion) and create more than 44,000 jobs.

Extend the period of the PLI scheme by one year

Many of the selected companies were unable to meet their PLI targets last year due to COVID-19 related shocks to the supply chain, which is why the scheme has been extended for a year.

Also, under the revised scheme, existing PLI beneficiaries were allowed to add more products and re-apply for incentives along with changing the 5-year PLI plan period by a year.

It should be noted that companies had to forgo their incentives for the fiscal year ending March 2022 (i.e. fiscal year 2021-22) as a precondition for changing their PLI scheme period.

Meanwhile, other global companies are watching how the PLI scheme benefits the sector. US-based Garmin, a maker of premium smartwatches and wearables, said it was monitoring chart performance, which could affect its manufacturing plans in India.

India’s demand for 5G equipment

Bharti Airtel and Reliance Jio are steadily rolling out their 5G network, creating sudden demand for 5G telecom equipment. As a result, major European companies Nokia and Ericsson have increased their production of 5G equipment for the Indian market. Telecom companies aim to add about 10,000 5G sites per week in the next three to four months.

In addition to Airtel and Jio, Vodafone Idea will also start building its 5G network within the next two months; It is currently in test mode with 5G services available in select locations.

Remove China from its old network

Besides rolling out the new 5G, Bharat Sanchar Nigam Ltd. (BSNL) state-run launched 4G network in the country. Only Indian companies were allowed to bid on this, of which the contract was awarded to the Tata Consultancy Services (TCS) consortium. The transaction value is approximately 270 billion Indian rupees (3.30 billion US dollars).

Impact of 5G on India’s GDP

Industry body Nasscom predicts that by 2030, 5G services will boost India’s GDP by 2 percent, to $180 billion. It likely takes into account the current pace of internet penetration in India, which is underpinned by booming smartphone sales and the expansion of the digital economy. With industries rapidly digitizing, they require low-latency networks (optimized to process high data volumes with minimal delay) and machine-to-machine communications. This bodes well for 5G adoption in India, which is also home to leading global IT hubs.

Nasscom reports that India has 10 million active 5G smartphones, and 30 million new shipments were received last year. This is expected to accelerate as the speed of 5G rollout increases. In the first 5G auction round, 71 percent of the total GHz capacity was secured for INR 1.5 trillion (about $20 billion). Meanwhile, policies such as the National Fiber Optic Network (NOFN) plan to connect all 250,000G panchayats (village management bodies) in the country will facilitate the rapid adoption of popular 5G networks. According to Airtel, the tariff plans for 5G are expected to be similar to 4G in India.

In terms of subscriber growth in India in the past five to six years, telecom subscriptions posted a 3.37 percent compound annual growth (CAGR) between 2015 and 2019 while internet subscribers grew by 20.5 percent over the same period.

Digital data consumption in India grew at a compound annual growth rate of 113 percent between 2014 and 2019, jumping from 828 million GB to 76,320 million GB, respectively. Forty million new users joined India’s 4G network in 2021, bringing the total to around 740 million.

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