Can India Become A IT Manufacturing

As global MNCs move their manufacturing base to India, several of them have
realized that they need to create products for India locally. The primary reason
for this is to achieve success not only in India, but globally as well. On the
flip side, India is and will keep facing stiff competition from its neighboring
country China on account of several reasons like cheap labor and flexible
government policies.

A silent but stirring revolution is under way among many
eminent global high-end technology companies. After having established
themselves firmly in the Indian sub-continent, utilizing local talent to work on
essentially western problems, India has come a full circle now. IT majors are
now seeking our help when it comes to producing products in the country itself.

This phenomenon has already sparked a lot of activity in
companies like Cisco, Ericsson, Nokia, LG, Samsung and Alcatel. India's dream
of becoming a global manufacturing hub now seems to be moving in the right
direction. So much so, that even high-end chip manufacturing companies like AMD
and Intel are not far behind when it comes to committing themselves towards
establishing their manufacturing bases in this region.

The most recent IT major that plans to set its base in this
part of south Asia is Dell. Having done so, it aspires to increase its workforce
by 50% within two years.

Manufacturers Association for Information Technology's (MAIT)
President, Rajendra Kumar, believes that local manufacturing is all about
tapping the regional and burgeoning local markets within India and the
neighboring countries. "There is a lot of serious interest among big
players in the IT industry to manufacture locally. This manufacturing is likely
to tap local customers in emerging markets by developing affordable, relevant
solutions for them," he adds.

How it all started

Global MNCs initially established subsidiaries in emerging economies like
India for some reasons. It helped tap the local talent for servicing their
global customers as well as sell their current products and services to a new
customer base. The same global corporations increased their investment levels by
many folds as higher GDP growth rates led to enhanced per capita incomes in
these economies.

Another factor that acted as a catalyst was that of
relatively low manufacturing costs and availability of highly-skilled talent in
countries like China, Taiwan or Malaysia. Combined with mass economies of scale
and government policies that encouraged export-led growth since the mid-1980s,
China rapidly became the global sourcing and manufacturing hub. Now with the
entire support coming from the government quarter, India is already catching the
sight of global majors when it comes to setting manufacturing base over here.

When setting up semiconductor manufacturing facilities, AMD
has already teamed up with SemIndia to announce its manufacturing plans. Vinod
Agarwal, President & CEO, SemIndia firmly believes that India can do it with
the kind of talent that the country has produced so far. SemIndia has already
identified two possible locations for its proposed FabCity project. It involves
establishing semiconductor producing fabrication units within India.

"Yes, I don't have any doubt about India's
potential. The consumer electronic market in India is growing at a tremendous
pace. So we already have an electronic ecosystem being created with a lot of
players like LG, Samsung, Nokia and others, committing themselves for
manufacturing in India. In this situation, we would need a lot of semiconductors
as well; otherwise the same semiconductors would be imported form outside. It is
this need that is going to fan the manufacturing plans for different
semiconductor companies. We are surely going to lead in this direction," he
added.

What's in store for solution providers?

Whether it is a big global system integrator like Wipro or a regional
solution provider, all are set to gain from the country, establishing itself as
a profitable global IT manufacturing hub. "It is quite simple. Today there
are not many solution providers who can dabble on the manufacturing side of
products. This will change for big as well as small solution providers. Simply
put, they will have more work to do. These companies will move from just being a
software player to a bigger level of hardware and software integration
capability. I am sure that by that time, we will have more global systems
integration companies from India," Vinod added.

Additionally, solution providers can look forward to first
inventing solutions that are tailored to local consumers in India as well as in
emerging markets. More importantly, working in one emerging market and
delivering a healthy mix of hardware and software capabilities will provide
insights that can be deployed in culturally adjacent markets for this new breed
of solution providers.

Lingering problems

Even though India's march towards becoming a global IT manufacturing hub
seems to be a reality for the near future, the country still needs to address
certain pressing basic issues related to power and infrastructure. So whether it
is an international airport of telecommunication equipment, lack of
infrastructure development is now perceived as the key constraint to cutting
edge industrial development as well as considered necessary to improve the
condition of rural areas.

However, as we move forward, India will have to work a lot
harder towards building and upgrading roads, seaports and airports. It will have
to deliver the power to mission critical information technology sector in order
to better its chances against countries like China.

ZIA ASKARI