According to Indian press reports, the country’s Department of Telecommunications (DoT) is having trouble with its incentive scheme encouraging local production of telecommunications network equipment.
We announced in June that India is planning to ramp up incentives for the local manufacture of mobile phones through the introduction of a number of electronics manufacturing schemes. This seems to have enjoyed a good response.
However, a similar production-linked incentive scheme to encourage local production of telecommunications network equipment has reportedly been less popular with major names like Samsung, Nokia and Ericsson.
There is, apparently, a manufacturing cost disadvantage for vendors siting their factories in India compared to countries like Vietnam, Thailand, the Philippines and China, which is one reason that incentivising companies to come to India is part of DoT policy.
Nevertheless, the fact that vendors, most of which have plants in India already, are being asked to hand over around $66.8 million – $93.5 million to set up new plants is one likely reason for this lack of enthusiasm. Huawei and ZTE, of course, are already uncertain about their future in India, given the rather uncomfortable state of India-China relations at the moment.
More to the point, this isn’t a great time for the Indian telecommunications market in general and 5G in particular. More than one Indian operator is still dealing with debt that includes vast sums in AGR dues, which means they may be wary about investment, and especially 5G investment. There’s also the problem of pandemic-inspired economic uncertainty.
Where, one might ask, is the market that will justify tens of millions of dollars of extra upfront expenditure by equipment vendors?