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Acknowledgements

Members who have served the Manufacturing Advisory Committee

Mr. Pankaj Mohindroo, National President, ICA & Chairman of the CommitteeMr. Vineet Sehgal, Business Development Manager, Nokia India Pvt. Ltd. Member Secretary.Mr. Ambrish Bakaya, Commercial Director, Nokia India Pvt. Ltd. Mr. Narendra Nayak, Director, Motorola India Pvt. Ltd.Mr. Ajai Chowdhry, Chairman & CEO, HCL Infosystems Ltd.Mr. Kunal Ahooja, Vice President-Telecom, Samsung India Electronics Ltd.Mr. Lokesh Gupta, Chief Executive, Spice Net Ltd.Mr. Jukka Lehtela, Director-India Operations, Nokia India Pvt. Ltd.Mr. Sudhin Mathur, General Manager-India, Sony Ericsson Mobile Communications International ABMr. Mohit Kapoor, Sales Director-South Asia, Wireless Terminal Business, UTStarcom Inc.Mr. Jaswant Munoth, Managing Director, Munoth Communications Ltd.Mr. Sanjeev Sharma, Managing Director, Nokia India Pvt. Ltd.Dr. RC Chopra, Senior Director, Ministry of Information TechnologyMr. NP Singh, DDG (PIP), Department of TelecommunicationMr. Vinne Mehta, Director General, MAITMr. SC Khanna, Secretary General, AUSPIMr. TV Ramachandran, Director General, COAIMr. R Deshpande, President, ELSINAMr. Umang Das, COAI's representativeMr. Henry A Gilchrist, Director-Business Development & Marketing, Elcoteq Asia Ltd.Mr. Prithipal Singh, Ex-CMD, BSNLMr. Dave Greenwood, Managing Director, Seges Consultants Pvt. Ltd.Mr. Gopal Jiwarajka, Joint Managing Director, Salora International Ltd.Mr. Jonas Nordquist, Head Mobile Phones, Siemens Ltd.Mr. Rajesh Sharma, Director-Sales, Bird International Ltd. Invitee

Sponsors

Our sincere thanks to the sponsors of this report:

Principal Sponsor:

Ministry of Communication & Information Technology

Platinum Sponsor:

Reliance Infocomm Ltd.

Associate Sponsor:

Munoth Communications Ltd.

Information Sources for the Study

Handset OEMsNokia, Motorola, SamsungEMS firms/ Electronic ManufacturersD-Link, Elcoteq, Flextronics, Salora, AT&SPolicy/ Regulatory/ Industry Bodies Indian Cellular AssociationManufacturers Association of Information Technology (MAIT)Software Technology Parks of India (STPI), BangaloreDepartment of Information Technology, Min of Comm & ITIndustry Data/ ReportsReports and analyst projections on the Mobile telephony sector in IndiaiSuppli - India: The Next China, September 2003CLSA Asia Pacific Markets - Zero-One: Mobile Production,September 2004 Morgan Stanley - India and China: A Special Economic Analysis, July 2004MAIT/ E&Y India: The Hardware OpportunityCSFB - China Handset Monthly, June and July 2004Directorate General of Commercial Intelligence Handset Import StatisticsWTEC Panel report, Electronics Manufacturing in the Pacific Rim, 1997Chinas Semiconductor Industry Yearbook 2004Company websites

List of acronyms used in the report

Abbr.Definition3GThird Generation Cellular TechnologyARPUAverage Revenue per UserASPAverage Selling PriceBGABall Grid Array (SMT technology)BOMBill of MaterialsCAGRCompounded Annual Growth RateCDMACode Division Multiple AccessDTADomestic Tariff AreaEHTPElectronic Hardware Technology ParkEMSElectronic Manufacturing ServicesFDIForeign Direct InvestmentGDPGross Domestic ProductGSMGlobal System for Mobile CommunicationsICIntegrated CircuitINRIndian RupeesITAInformation Technology AgreementIPPIndependent Power Producer

Abbr.DefinitionNRSNational Readership SurveyODMOriginal Design & Manufacturing firmOEMOriginal Equipment Manufacturer (Handset vendor)PCBPrinted Circuit BoardPHSPersonal Handyphone SystemPSE/ SOEPublic Sector Enterprise/ State Owned EnterpriseRFRadio FrequencyRTCReal Time ClockSAWSurface Acoustic Wave filterSMTSurface Mount TechnologyTCOTotal Cost of OwnershipTFT LCDThin Film Technology Liquid Crystal Display screenUSDU.S. DollarVATValue Added TaxVLSIVery Large Scale Integration ICWTOWorld Trade Organization

Table of ContentsExecutive Summary9

Global Handset Manufacturing Models13Benchmarking Manufacturing Costs20Manufacturing Capability Assessment32Policy & Regulatory Measures37The Handset Manufacturing Opportunity in India44Key Recommendations53

AnnexureThe Handset Manufacturing Value Chain61Key Handset Components68Policy Case Study The Taiwan Electronics Industry90

Mobile subscriber growth in India could catalyze manufacturing, with the right enablers in placeThe spiraling growth of mobile subscribers in India and the resulting demand for mobile handsets can be a crucial catalyst in the evolution of handset manufacturing in India, and electronics manufacturing at large. Global handset sales are expected to touch 800 Mn in 2005, and eventually cross 1 Billion by 2007.[1] The mobile handset is poised to be become the most common consumer electronics device in the world. Factoring an Indian demand potential for handsets of the order of 75Mn by 2010, and potentially attracting 15 percent share of the capacity addition in the industry till 2010; India can become a production base for 100Mn handsets by 2010. This translates into a USD 5 Bn potential opportunity[2], generating employment for over 20,000 workers with three to four times as many in components and accessories.[3]What would it take for India to actualize this potential?Achieving the potential of a 100Mn production base by 2010 from scratch, would require the govt. to be proactive in addressing weaknesses such as infrastructural bottlenecks. It also requires time-bound policy interventions in terms of attractive fiscal incentives for the next five years to generate this critical mass. This would be a key requirement for India to be viewed as an attractive manufacturing destination by global handset OEMs, who evaluate India in the context of other manufacturing locations such as China, Brazil, Eastern Europe etc.This would require a proactive policy targeted at attracting the handset OEMs and other players in the component value chain. It would need to take the features present in the Electronics Hardware Technology Park (EHTP) scheme and enhance it with specific incentives such as corporate tax incentives and high-quality infrastructure in dedicated Infrastructure Parks.Assessment of leading handset manufacturing destinations provides some indicators on the critical enablers that make a location attractive. Factors such as proximity to demand (China, East Europe); existing electronics mfg. base (Taiwan); labor arbitrage (China, Malaysia); technology leadership (Finland) and enabling govt. policy (China, Taiwan, Brazil) have led to their becoming preferred handset manufacturing locations.India scores high in terms of potential demand and a low-cost manufacturing proposition. The fact that several players have announced handset manufacturing plans in the previous six months, indicates that the Indian business case is fundamentally sound. It is up to the government to seize this opportunity and ensure than India is in a position to attract a significant part of the capacity addition in the industry in the next few years.Handset manufacturing spans seven distinct segments: with the handset OEM being the key stakeholder Handset manufacturing is an interplay between design, components and manufacturing. The value chain constitutes handset design; four component categories ICs, passives, modular components, plastic parts; and three manufacturing steps PCB assembly, box-build assembly, and testing. Each segment requires distinct skill-sets, technology and investments, with different product leaders in each segment e.g. ICs (Texas Instruments), passives (TDK), modular components (Sanyo, Allgon), plastic parts (Perlos) etc. A mobile handset consists of several hundred components including connectors, inductors, plastic parts, buzzer etc. In value terms, the ICs (Baseband, RF and memory chips) and the LCD screen constitute 50 percent of the Bill-of-Material (BOM) value of a handset, and are hence the critical drivers of the handset price. EXECUTIVE SUMMARY[1] Gartner report (July 2005): Forecast: Mobile terminals worldwide 2000-2009[2] Assuming an average mobile wholesale price of USD 100 for phones manufactured in India[3] Employment potential based on discussion with industry players in India, and China electronics manufacturing statistics for 2003*

At the centre of this complex supply chain is the Original Equipment Manufacturer (OEM), viz. firms such as Nokia, Motorola and Samsung. In addition to being brand owners, these firms also undertake handset reference design and coordinate their global supply chain. The presence of Electronics Manufacturing Services (EMS) firms allows the handset vendor/ OEM to outsource PCB fabrication, assembly and testing. The rapid pace of new model introductions has led to the mergence of the Original Design Manufacturer (ODM). Handset vendors utilize ODM vendors to carry out handset reference design and manufacturing to plug gaps in their R&D/ design. For e.g., Nokia utilized BenQ to introduce some of its clam-shell handsets for the Chinese market.This makes handset OEMs, EMS and ODMs critical stakeholders in terms of handset manufacturing location decisions. These would be the entities, who based on their assessment of the India manufacturing story, would potentially relocate a part of their supply chain to India. This would be the first step in building a robust handset manufacturing industry. As witnessed in other locations, the affiliated component supply chain is also pulled close to the handset facility, establishing the parts of the handset-driven supply chain in India. The criteria impacting the decision to manufacture a component locally (other than proximity to the OEM) include scale of investment and labor arbitrage potential. For e.g., the investment requirement varies from USD 10 Mn for a battery unit to USD 1-2 Bn for an IC fab. Conversely, components such as plastic parts have high labor arbitrage in India, while LCD screens would have little. Based on this framework, a roadmap for localization of the components sector can be formulated. Prima facie, this assessment indicates that up to 26 percent of the BOM (plastic parts, battery etc) can be localized immediately, with another 30 percent being manufactured in India over 3 to 5 years. Indias electronics manufacturing is negligible in the global electronics scenario; positive government policy would be critical to achieve critical massWhile Indian electronics manufacturing in India grew by 17 percent to USD 9.3 Bn in 2004, it is still a minuscule percent of global electronics. In spite of its infancy in the global scenario, the current Indian electronics scenario could provide the platform for handset and component manufacturing in the country. Electronics players (Indian and multinational) with Indian operations range from ODM/ EMS firms viz. Elcoteq, Flextronics, Jabil Circuit, Solectron, Celetronix, D-Link and Sasken; component manufacturers such as AT&S (PCB), Molex, Hical (magnetics), Tyco (connectors), Solectron Centum etc. Their positive manufacturing experience and the expected demand potential has led to many of these players drawing up aggressive growth plans. As mentioned before, the proof of the pudding would be in handset OEMs setting up manufacturing facilities in India.Hence, the stage is now set for handset manufacturing to take off. The need of the hour is for a strong policy effort from the government to proactively promote electronics manufacturing in the country.The Taiwanese electronics policy is considered the Gold Standard in terms of positive government intervention to foster the electronics industry from the 1960s to the Millennium. (Annexure C)The coordinated effort was supported by an intense academic and research program in microelectronics, coordinated by the ITRI a non-profit government organization, which promoted technology transfer from the universities and technology institutes to the private sector. The government also invested heavily in industrial parks, which attracted the gamut of industries from semiconductor, telecommunications, computer peripherals as well as academic institutions. These industrial parks were given excellent infrastructure facilities such as proximity to ports and airports. EXECUTIVE SUMMARY (cont.1)*

In order to attract FDI and investment in the industrial parks, the govt. (since the early 90s) provided fiscal incentives such as one-stop permits, 5-year corporate tax exemption, tax exemption for investment in R&D, factory automation and training programs, and finally duty exemption on all imported components. The government also took up equity participation in electronics startups, and developed a structured incubation program for developing high-tech industries.To achieve the scale of the Taiwan and Chinese electronics industry, the government would need to put in place a concerted electronics manufacturing policy to get the results achieved in these countries. Let us now assess some of the critical bottlenecks that need to be streamlined to support this opportunity.India is a proven low-cost manufacturing location; infrastructural bottlenecks impede lowest-cost operations The key drivers of handset manufacturing costs include extent of component localization, labor arbitrage, efficient infrastructure to optimize supply chain costs, and policy measures to reduce fiscal costs. Scoring well on these factors, China has become the benchmark in low production cost, and makes up 35 percent of global handset production.[4] In the case of India, it compares well in terms of low cost of labor and manufacturing skill-sets. In an international competitiveness study conducted by the IMD business school (Switzerland), Indian manufacturing wages were lower than that in Mexico and were comparable to that of China. In terms of availability of skilled labor, India ranked highest in the world along with Singapore and USA. In terms of qualified engineers too, India ranked the highest in the world.However, the key impediment to handset manufacturing in India is the high cost of infrastructure services. For instance, China invests 2.5 percent of its GDP on roads as compared to 0.3 percent in India. This results in higher freight costs in India. For e.g., the freight as a percent of cif import cost in India is 11 percent, as compared to a world average of 6 percent.[5] Procedural bottlenecks in imports are also significant obstacles. While processing of imported goods in China takes 2-3 days; the average time taken in India is 10 days.Cost of utilities is also a impediment to manufacturing in India. Peak electricity shortfall in India was 12.1 percent in 2003. Cost of power to industrial consumers is at least twice as expensive in India as in China. Due to frequent outages, most units in India choose to install captive units resulting in a higher cost of power. Labor regulation is the other widely cited bottleneck to the Indian manufacturing business case. Flexibility in labor laws, such as hiring contract labor, is critical in electronics components manufacturing, which are cyclical industries. It is thus not surprising that the World Economic Forum (WEF) ranked India 98th among 102 countries in terms of labor reforms. (China ranks 26th)In spite of these bottlenecks, a comparison of the cost of a handset manufactured in India vis--vis a handset imported from China indicates that the two are almost at par (under nil customs duties). The lower cost advantage due to labor rates and savings in import freight (from manufacturing in India) is being negated by the higher cost of utilities and procedural delays in the import supply chain.Thus, infrastructural bottlenecks are impeding India from achieving lowest cost manufacturing in handsets. In the final section, a roadmap is outlined that could address some of these impediments, and more importantly, enhance the positives that India enjoys, in maximizing this handset manufacturing opportunity.EXECUTIVE SUMMARY (cont.2)[4] iSuppli India, the next China, September 2003[5] CII-McKinsey report*

Vision 2010: Growth roadmap for Indian handset manufacturingOur analysis indicates that India could become the sourcing base for up to 100 million handsets an year by 2010, catering to local demand as well as incremental global handset demand in the next few years. We now outline the key initiatives required on part of the Govt. to make this vision happen, in terms of short-term and medium term initiatives. As outlined in the introduction, these incentives should be combined into a package targeting global handset OEMs and other players in the component manufacturing value chain.Incentivize local manufacturing (Immediate)Fiscal holidays and capital goods depreciation for up to 10 years would make the Indian fiscal package to handset OEMs more attractive than competing manufacturing destinations such as China Promote awareness about the EHTP scheme which makes India a key electronics-friendly destinationWorld-class infrastructure such as road connectivity, proximity to airports, high quality of utility services in identified Clusters. Specific interventions such as ensuring quality power to manufacturers; with targeted subsidies till 2010 to make the cost of power comparable to competing locations such as ChinaProactive effort to attract global OEMs and supply chain partners by reaching out to potential investors and making them aware of developments in Indian manufacturing and available incentivesOur assessment indicates that the cost of importing a handset into India (from China) is nearly at par with the projected cost of manufacturing a handset in India. Hence, continuing with the Special Additional Duty of 4 percent on import of handsets till 2010 would make the Indian manufacturing business case viableEXECUTIVE SUMMARY (cont.3)Streamline supply chain bottlenecks (Immediate)Round-the-clock operations at import ports/ airports including weekends and holidaysAutomated electronic cargo processing for electronics importers/ EHTP unitsPre-clearance as an option for designated units with no physical inspection of inbound goodsDedicated unit at the airport for obtaining clearances for component imports for handset manufacturersInvest in component manufacturing (Medium Term)While the immediate focus should be on attracting handset OEM/ EMS players, the govt. should promote component manufacturing in the medium termPromote component manufacturing through incentives such as subsidized interest rates for component players on the lines of the TUF policy in the textiles sectorCertification programs and awards to ensure high quality of Indian componentsThis could be achieved through an Open Cluster model that attracts component manufacturers with multi-use applicationsInvest in R&D/ technology centric activities (Medium Term)Agency to promote electronics research and manufacturing in the country on the lines of the ITRI in TaiwanEngage with financial institutions (FIs) to promote Venture funds for the electronic components sectorProvide grants to universities for targeted telecom research to develop products and technologies catering to the Indian and global market;Continue with 100 percent FDI in the sector to attract investments*

Global Handset ManufacturingGlobal handset manufacturing models?What constitutes the handset value chain?Handset BOM listing and cost breakup?Roadmap for Localization of the BOM

Handset manufacturing can be broken down into seven key segmentsThe handset value chain involves diverse technologies and competencies such as VLSI design, material science and labour intensive manufacturingSemiconductor ICsPassive ComponentsPCB Fabrication23 Modular Comp/ Subassembly4Box-build Assembly6

Enclosures/PlasticParts

5TFT LCD screenAntennaLi-ion BatteryBuzzerVibrating motorFront coverBattery coverAntenna coverPower switchKeypadTesting/After-Sales^71Detailed description of each value chain segment in Annexure ATHE HANDSET MANUFACTURING VALUE CHAIN+NOTES:+ Handset reference design - a critical element of the handset value chain, is dealt with separately in later sections^ Testing and after-sales repair activities are largely similar

Each value chain segment involves diverse technologies and manufacturing capabilitiesThe range of technology and manufacturing skill-sets has led to a complex supply chain involving a range of entities and manufacturing models

Value Chain SegmentComponent/ ProcessTechnology/ Manufacturing CapabilitySemiconductor ICsSub-micron IC wafer fabrication;R&D IC designPassive ComponentsR&D materials; R&D miniaturizationPCB BoardPCB AssemblySurface Mount Technology (SMT) lines with BGA capability Modular ComponentsR&D Element specific design e.g. TFT-LCDSystem Level Packaging (SLP)Plastic PartsPrecision plastic molding; Plastic die and tinting processesBox BuildLabour intensive; Concentrated in low-cost manufacturing locationsTesting/ After-sales repairInterpretation of test/ repair diagnostic results; Improves yield of manufacturing by reducing defects

Up to 50 percent of the Handset Bill of Materials (BOM) is made up of a few high-value components Source: KPMG Analysis; iSuppli Corp; CLSA Asia Markets1. For an entry-level TFT-LCD colour screen phone which retails at USD 100The localization potential of a component would depend on its criticality and contribution to the overall BOM

ModulesKey ConstituentsCost (USD)% BOMSemiconductor ICsBaseband, RF IC, Memory20.534%PassivesResistors, Capacitors, Filters5.08%LCDTFT-LCD screen9.015%Electro-mech parts Antenna, Connectors5.59%Flexible PCB4.06.5%User InterfaceBuzzer, Motor, Microphone, Speaker6.010%BatteryLi-Ion, RTC4.57.5%AccessoriesCharger, Hands-free2.54%Enclosures/ Plastics/ Metal partsCovers, keypad, switch3.05%Total Bill of Material60.0100%

Localization of handset BOM components would also depend on its application across the electronics value chainThe range of applications of handset components positively influences the feasibility of its localizationSource: iSuppli Corp

Alternative ApplicationsKey componentsIndian Demand 2010 (USD Bn)Computers and PeripheralsICs, passive components, PCB, modular components, plastics3.8Telecom Network EquipmentICs, passive components, PCB, modular components2.5Consumer ElectronicsICs, passive components, PCB, modular components10.8Auto ElectronicsICs, passive components, PCBN.A.Industrial ElectronicsICs, passive components, PCBN.A.

The localization potential of each value chain segment would be evaluated on a combination of criteriaThe experience of Handset Manufacturing worldwide suggests a roadmap of BOM localization over five years through JVs and technology transfers236514^ Typical scale of investment for a component manufacturing unit by global component manufacturers in the category

Component/ Process% of BOMCapital Investment^Technology/ ManufacturingGlobal IndustryApplicationKey Drivers for LocalizationSemiconductor ICs34%~ USD 1-2 BnWafer fabs sub-micron capabilityFoundries in Taiwan and ChinaAcross all electronicsR&D design skillsPassive Components8%~ USD 100 MnR&D materials; MiniaturizationSpecialist vendors in Japan and EuropeAcross all electronics-PCB BoardPCB Assembly6% +Conver-sion~ USD 10 Mn SMT lines with BGA capability Specialist FPCB vendors; SMT lines widely distributedAcross all electronicsSMT lines fungible; Labour arbitrageModular Components24%Component specificSystem Level Packaging (SLP)Specialist vendors for LCD, antenna etcSome alternate apps-

User Interface Battery21%~ USD 10 MnVarious; Tech not a bottleneckLarge base in key manf. locationsSpecific to handsetsLabour arbitragePlastic Parts5%~ USD 10 MnPrecision plastic molding and dieSpecialist vendor base for some partsWide App.Enables market customizationBox BuildLabour~ USD 1 Mn-Located in lowest cost locationsWide App.Significant labour arbitrage

Based on criteria such as Investment/ Technology requirement and labour arbitrage, components could be localized over five yearsInvestment/Technology Intensity

HighModerateLowLabour arbitrage potentialLowModerateHighPASSIVESMODULARCOMP.ICsUI/ BATT/ACC.PLASTICBOX BUILDPCB ASSEMBLYLEGENDImmediateSecond Wave (2-5 yrs)ImportMultiple ApplicationsFLEXIBLEPCBUpto 30 percent of the BOM consisting of plastics, battery, accessories etc can be localized in the short-term; another 30 percent over 2 to 5 years; however component vendors would need to demonstrate low-cost, high tech manufacturing capabilities to achieve significant levels of localizationOpportunity size

BenchmarkingManufacturing CostWhat are the cost advantages achieved from manufacturing in India?What are the key bottlenecks?How does India compare with key manufacturing locations such as China?`

The typical cost structure of an imported handset can be broken down into ICPassiveModularPlasticBoMcifcostConversionCostFreightTradeMarginSales/L. Tax$60ImportDuty~$2~$1$4 -5$25$50$75$100~$4Mkt Exp./O/H~$6~$8~$75NOTESIllustrative cost structure for a handset that retails in the USD 100 rangeConversion cost (incl. labour, utilities, depreciation, interest) assumed at 3 percent of total cost Cif cost (import cost incl. Insurance & freight) data aligned to DGCIS dataImport duty on cif price @ 5 percentCurrent inventory carrying cost assumed to be negligibleSales tax @ 4 percent. Local taxes include octroi and entry taxes Illustrative cost structure for a USD100 handsetInventorycostIndian manufacturing costs would be benchmarked primarily with that of China which produces 35 percent of the global handset output

Handset manufacturing cost in India is primarily influenced by factors including labour arbitrage and absence of local component baseNOTES:Not applicable in current scenario due to absence of local component baseLabour arbitrage becomes a significant cost driver after significant localization of BOM is achieved; and not before as conversion costs are ~2% in handset manufacturing+ Positive impactx Negative impact Positive potential

FactorBOM costConver-sion costFreightImport dutyInventory costMkt Exp. & OverheadTrade MarginSales/ Local TaxAvailability of skilled low-cost labour1+Policy measures such as EHTP++Absence of local electronics component basexxxInfrastructure and procedural bottlenecksxx

India compares favourably in terms of wage costs globally; however conversion costs are typically low in handset manufacturingConversion costs (wages, utilities, depreciation and interest costs) as a proportion of manufacturing cost is 2-3 percent Source: IMD Competitiveness YearbookWhile not a key differentiator in handset manufacturing, labour arbitrage is important in terms of the feasibility of the electronic components industryManufacturing Wages (USD per hour)*Assumptions: 1,500 personnel required for a 1 Mn unit/ month manufacturing unit; industry estimates

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PortTons of EO% ShareIn '000 TonsTotal '000 TonsLiquid Bulk HandledShare of EO in portsShare in Liq. BulkTA Time in Days (other liq. Bulk)Avg. output per berth day (tons)

Kandla109100528.24109137728266072.9%4.1%1.437406

Mumbai47447912.2847426433166521.8%2.8%1.982725

JNPT41690710.794172252128471.9%14.6%1.845730

Mg'lore1583554.115817510101940.9%1.6%1.456433

Mundra3487539.03349

Cochin195950.51201205786850.2%0.2%1.13800

Bedi1486743.8514931164.8%

Karwar0005270.0%

Kolkata3426198.87343537431366.4%10.9%3.942133

Kakinada55516114.3755582267.5%

Chennai3001017.773003611596820.8%3.1%3.53893

Tuticorin60000.166130179410.0%0.6%2.433836

Nagapattinam15000.042

Vizag00044344192520.0%0.0%2.114619

Paradip0001990125790.0%0.0%4.627632

India0.43

China0.75

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The large pool of skilled and low cost workers and engineers is a key driver for local electronics manufacturingSource: IMD Competitiveness YearbookAvailability of skilled labour (1=Low, 10=High)Availability of qualified engineers (1=Low, 10=High)Source: IMD Competitiveness YearbookElectronics manufacturers in India state that the knowledge of English in this resource pool expedites the pace and quality of technology transfer

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Positive policy measures such as the EHTP scheme provide additional fiscal benefits to local manufacturersElectronics Hardware Technology Park (EHTP) schemeA positive initiative towards electronic manufacturingKey featuresScheme applicable for ITA-1 products Single window mechanism under the DoE, Min of ITNet Foreign Earnings (NFE) positive requirementNo minimum export requirement; Domestic Tariff Area (DTA) access allowed Duty free import of capital goods, raw materials, components and other inputsNo payment of Central Sales Tax (CST) and/or excise for goods sourced locallyThe EHTP has been a significant step in providing an impetus to local electronics manufacturing

However, global manufacturers also cite bottlenecks in efficient manufacturing in India as an impediment to achieve competitivenessFrequent changes in duty and taxation structure Impediment to long term planninge.g. in Budget 2004-05, the duty on PCs was reduced to zero; and then replaced by a CVD of 7 percent in a weeks timeDelay in implementing VAT, that has significant impact on supply chain managementAbsence of a significant electronic components vendor base in IndiaSupply chain complications due to infrastructure bottlenecks Procedural bottlenecks such as customs clearancesInflexible labour regulations

Electronics manufacturing is driven primarily by component costs which in turn are driven by economies of scaleElectronics manufacturing is driven primarily by economies of scaleCost of components can vary by as much as 80 percent depending on the scale of manufacturing

Indias electronics base at the moment is small India produces USD 150 Mn PCBs vs. a global output of USD 35 BnWorldwide connector market USD 30Bn vs USD 40Mn production base in India

Indian electronics sector output (USD 9.3 Billion in 2004) is small when compared with Chinese production of USD 185 Billion (2004 estimates)The absence of a significant local component vendor base adds to freight costs as well as supply chain complexity Typical electronic component cost Production output (log scale)10020Cost IndexILLUSTRATIVESource: Industry estimates

In India, the cost of most infrastructure services is 50 to 100 percent higher than in ChinaThese factors contribute to higher costs in India in terms of freight and utilities costsHighways1.4 Mn km of highways in China vs 250,000-km in India China invests 2.5 percent of its GDP on roads as against 0.3 percent in IndiaResults in higher freight costs in India; e.g. freight as a percent of cif cost in India is 11 against a world average of 6 PowerPeak electricity shortfall in India is 12.1%Power to industrial consumers is twice as expensive in India as against ChinaDue to frequent outages, most units need to generate their own captive power Source: IMD Competitiveness Yearbook 2003Cost of power to industrial consumers, 2002(USD per kWh)Length of Highways, India vs China, 2000Source: China Statistical Yearbook, KPMG analysis

Procedural delays and labour regulations add to the constraints of manufacturing in India Number of daysBottlenecks to Trade, India vs ChinaSource: CII and McKinseyProcedural delaysDelays at port and poor infrastructure from ports in terms of roads, rail etcProcessing time for imports can be as high as 20 days compared to 2-3 days in China

Labour regulationsWorld Economic Forum (WEF) ranks India as 96th among 102 countries in terms of hire and fire policies; China ranks 26thChina has pursued labour reform including contract labour, and hire & fire policies since it initiated its liberalization processCustoms delays and restrictive labour laws continue to hinder Indian manufacturingChinaIndia

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Hence, Indian manufacturing costs tend to be at par with the cost of imports;Cost benchmarking: India vs. ChinaMarginally lower freight and labor costNullified by marginally higher cost of utilities;and Procedural and port delays resulting in import penalty due to higher inventory costsKey differentiator would be import dutyHowever, using India as an export base provides cost savings to manufacturersExport penalty of 1 percent due to infrastructure delays in exports;Provides net manufacturing cost benefit of 3 percent Imported handset vs. local manufacturing:Cost differential due to key cost drivers NOTES:Manufacturing penalties are calculated based on procedural delays in the import supply chainImport duty @ 5 percent; would not be applicable post March 2005 The primary cost differential would continue to be the import duty

Benchmarking manufacturing costs - SummaryCost advantages of operating in India arise from two significant drivers A) Policy measures such as EHTP that allows for duty-free import of components provides a 4 percent net cost advantage B) Availability of low-cost skilled workers and engineers makes India a marginally lower cost location than China in terms of handset manufacturing (conversion) cost C) Labour arbitrage is a significant driver in component manufacturing; and would be a key differentiator once India has a significant component vendor baseHowever, there are a number of constraints that impact Indias viability as an electronics manufacturing location A) Lack of an established component base is a constraint; adds to overall freight costs and adds to supply chain complexity B) Infrastructure bottlenecks like higher cost of utilities and poor infrastructure; and procedural delays at ports cause a manufacturing penalty of the order of 1-2 percentThe cost of manufacturing handsets in India compares favourably with imported handsets: A) The manufacturing penalty is netted by the freight and labour cost advantages; hence, the key cost differential is due to the import duty

Electronic Manufacturing Capabilities in IndiaCurrent electronics manufacturing scenario in India?Status of component manufacturing?`

While Indian electronics manufacturing has grown in the past decade, the sector is still small by global standardsIndian Electronics ManufacturingElectronics manufacturing grew at 17 percent in FY2006 to USD 12.3 BnElectronic components grew at 15 percent in FY2006

Electronics Manufacturing SectorsConsumer electronics manufacturing grew at 15 percent in FY2006Rapid addition in Color TV and Video disk player (VCD/DVD) capacityPCs and peripherals grew at 25 percent to USD 2.0 Bn in FY2006Indian electronics output of USD 12.3 Bn compares poorly to Chinas electronics output of over USD 200 Bn in 2005Electronics Prodn in India, FY06 (in USD Bn)Source: MoC&IT Annual Report

SegmentFY2006 Consumer4.2Computers2.0Communications2.3Industrial1.2Strategic0.6Components2.0Total12.3

However, a steady stream of Multinational and Indian electronics players have been setting up PCB Assembly facilities in IndiaSource: Primary meetings, iSuppli Corp, STPI & company web-sites

PlayerDescriptionFacilitiesLocationKey achievementsTop 5 global EMS3 SMT linesBangaloreHandset repair and sub-assembly capabilityTop 5 global EMSSMT linesODM capabilitiesBangaloreOne of seven Solectron global design centresTop 5 global EMSSMT lines acquired from PhilipsPuneConsumer electronics EMSGlobal EMS with facilities in India and Sri Lanka SMT lines400-strong design teamMumbaiIndia-based design and NPI facilitiesTaiwanese product firm3 SMT linesGoaHigh throughput manufacturing centreTop 5 global EMSPlanned handset manufacturing unitBangaloreFirst Indian handset manufacturing facility

Multinational and Indian electronics players have set up component manufacturing facilities in India (contd)Source: Primary meetings & web-sites

PlayerKey ComponentsFacilitiesKey achievementsMicro hybrid circuits for UPS, DC/DC convertorsCODEC and VCO components in handsetsClass-100 Clean room facilities in BangaloreLucent, Nortel and BT source their Frequency Controlled Elements from Solectron CentumConnectors; switches Fibre optic interconnection systemsAutomotive harnessesConnectors and switches in BangalorePrecision tooling unit in KochiTooling unit in Kochi is one of five global tooling units for TycoMagnetic components for cell-phone chargersDesign, manufacturing facilities in BangaloreExports 40 Mn components p.a.Key clients include Nokia and ST MicroPlastic injection molding elements for medical, auto and telecom equipmentClass-100 and 1000 manufacturing facilities in BangalorePrinted Circuit Boards for mid-range and large scale ECAD centre in Bangalore for PCB designEnd-to-end PCB manufacturingFacility near Mysore is the largest PCB facility in India, and one of six AT&S manufacturing locations globally

To conclude, electronics manufacturing firms have had a positive experience in India due to a large base of English-speaking, skilled technicians Some of the insights provided by electronics firms from their manufacturing experience in India include:Indian manufacturing facilities are competitive on cost vis--vis manufacturing locations in China, The large base of English speaking, ITI-trained technicians allows for rapid technology transfer Capabilities of Indian technicians in testing services makes productivity and process yield comparable to other key manufacturing locationsSupply chain issues due to infrastructure bottlenecks are overcome by creating vendor-hubs and operating in manufacturing friendly statesFirms with electronics manufacturing facilities in India have achieved both tangible cost benefits and intangible benefits due to the skilled workforce

Policy & Regulatory MeasuresKey policy levers for Manufacturing?Evolution of Taiwan/ Chinese electronics manufacturing policy?

Countries have emerged as preferred telecom manufacturing locations due to the interplay of several factorsLocal demand/ Proximity to demand centres China, Brazil, Eastern Europe, MexicoExisting electronics manufacturing base Taiwan, China Govt. policy & incentives China, Taiwan, Brazil, MexicoR&D investment, product leadership Finland, KoreaLabour arbitrage China, Malaysia, Eastern EuropeLocal demand and/ or labour arbitrage may not be sufficient conditions for the development of a telecom manufacturing base

Three types of policy interventions have been typically used to promote electronics manufacturingIncentives/ Strategic investmentsR&D support through grants to universities - TaiwanInfrastructure facilities such as Industrial Parks Taiwan, ChinaEquity investment in new ventures and VC funds Taiwan, ChinaTariff measuresHigh tariff barriers on imports - BrazilDifferential VAT on imports vis--vis local electronics manufacturing ChinaNon-tariff measuresCompulsory Certification requirement - ChinaCompulsory local manufacturing and technology transfer through licensing - ChinaLocalization requirement BrazilExport requirement - China In this context, we evaluate the Taiwan and China electronics promotion policies to identify key takeaways for Indian policy

The Taiwanese electronics industry developed due to long-range planning and strategic investments by the governmentLong-range planning and specific government interventionsTaiwan set up the Industrial Technology Research Institute (ITRI) to promote the semiconductor and electronics industryAround 50 hi-tech semiconductor companies in Taiwan were an offshoot of research programs;Statute for Upgrading of Industries (SUI Taiwanese policy; 1991-2001) Science and Technology Advisory Group (STAG) set up within ITRI with advisors from leading US players such as RCA, TI, Motorola and IBMTechnology acquisition by inviting foreign investors in Taiwanese companies;Aggressive 5-year tax holiday programs for strategic companies;Equity investments of upto 49 percent in these companies by the governmentPromotion of domestic VC funds for seed money; USD 32 billion VC funds by 2000Investments in Industrial parksHsinchu Industrial Park provided government-funded infrastructure facilities and tax incentives to electronics manufacturers; In ten years, there were more than 300 companies operating in the Hsinchu Park Taiwan capitalized on its established electronics industry to emerge as a key handsets and components manufacturing base Case study detailing the development of the Taiwan Electronics industry in Annexure C

China followed the Taiwan electronics policy to promote its nascent electronics manufacturing sectorSource: Semiconductor Industry Association (SIA)These policies enabled China to develop its IC and electronics sectors in time to capitalize on the global handset manufacturing wave

PolicyChinese policy c. 1994Taiwanese policy c. 2000Chinese policy c. 2002Principal form of investmentEmphasis on State owned enterprisesGovt. taking up minority stake in private playersGovt. taking up minority stake in private playersPolicy towards FDIHeavily restrictedLiberalizedLiberalizedPrincipal mechanism for promoting R&DEmphasis on R&D in state-owned universitiesPrivatization of research institutesPromotion of spin-offs from research programsPrivatization of research institutesSpin-offs from research programsIncentivesNoneMajor tax incentivesMajor tax incentivesTariffs on imports of ICs/ electronics6 30 percentNilIncreasing number of items under Nil dutyInfrastructureOver 100 High-tech parks1 flagship park; 2-3 other emerging parksA few flagship parks

Elements of the Chinese Electronics Policy State Circular 18Distinct move from reliance on PSEs to focus on private sector involvement in the electronics sector in 2000Promotion at all levels of government central, province and municipal - Granting residency permits, infrastructure etcThrough various measures, China has provided a favourable climate for investment in the electronics sector in the past five years POLICYFISCALINCENTIVESINVESTMENTPOLICYINFRA- STRUCTUREREMOVINGBOTTLENECKSEffective VAT rate of 3-6 percent on domestic IT products; imported products attract a 17 percent VATTax holidays for 5 years, taxation at half-rate for the next five years Investments in IC wafer fabs allowed to be depreciated in 3 yearsEquity investments in strategic microelectronics and electronics firms Equity investments in strategic microelectronics and electronics firms R&D funding from government to universities; resulting in research-led private sector spin-off firms from universities Transition from govt. bank loans to FDI and tapping financial marketsExpress customs clearance for eligible IC industries (both import and export)Infrastructure provided by local governments, which operate and promote the Industrial Parks such as Tianjin, Beijing and Suzhou

The evolution of Chinese handset manufacturing policy can be viewed separately as two distinct phasesPhase I Compulsory licensing for local manufacturingEffective VAT of 6% on locally manufactured phones; 17% VAT on imported phonesJVs promoted for component manufacturingAttractive incentives for electronics manufacturing (State Circular 18)Phase IINo fresh licenses Capped at 30 GSM and 19 CDMA manufacturing licensesExport-matching (State Circular 5) imposes up to 60 percent export requirement4 percent VAT on handset exportsChinese policy evolved from incentivizing local manufacturing to policy measures such as export-requirements and the VAT on exports

The Manufacturing OpportunityGlobal Handset Demand-Supply?What would be key drivers for OEM/EMS/ component vendors to set up in India?Potential for Indian brands?

China and Korea have emerged as the manufacturing base meeting the booming global demand for handsets Source: Nokia estimates; CSFBGlobal Demand^ (2005)Global Handset Shipments (2005)Source: CLSA Asia Pacific; KPMG AnalysisChina 12%Japan 7%India 6%The rapid growth in subscriber base is expected to make India one of the largest handset markets in the world800 Million handsets

A shift from the current import supply chain could unlock opportunity for India Indian demand by itself could translate to a 5-6 Mn units a month production baseThis estimate does not factor in potential export opportunitiesThis translates into potential employment for 20,000 employees and a factor of three to four times as many in ancillary industriesAnother important consequence from a local manufacturing base would be the development of a diversified electronics component baseHandset manufacturing could prove to be the catalyst for Indian electronics manufacturingImport Sources for Indian Mobile Phones (FY 2004)Source: DGCIS, Ministry of Commerce

OthersMalaysia3.3%Singapore3.8%Hong Kong1.9%Finland1.6%France0.8%USA0.6%

However, it is the handset OEM who would be the key decision maker regarding handset manufacturing location OEMs set up a manufacturing base in a country, and are accompanied by their key component suppliers For e.g. the Beijing Nokia cluster consists of:Elcoteq (EMS)Allgon (antenna)RF Micro Devices (power modules)Sanyo (batteries)Beijing GKI (subsidiary of Elcoteq/ PCB assemblies)Ibiden Energy (power modules)Foxconn (plastics)Savcor CoatingsPerlos (precision metal parts)

The Nokia Beijing cluster has a capacity to manufacture 25 to 30 million handsets p.a. and employs 10,000 people

EMS firms typically follow the lead of the OEM, evaluating the opportunity in handsets as well as the entire electronics value chainEMS firms would assess opportunities in serving the handset, telecom network equipment, computers & peripherals, automotive electronics etc while considering setting up base in India

Many leading Electronic Manufacturing Services (EMS) companies have a presence in IndiaElcoteq is in the final stages of setting up a handset manufacturing unit in Bangalore; (press reports)Flextronics has SMT lines in Bangalore, and acquired HSS to bolster its ODM capability in India;Jabil Circuit and Solectron have a limited presence in India;Indian Electronics Production Forecast 2010Source: iSuppli CorpEMS firms would evaluate manufacturing in India in the context of growing demand for handsets, telecom gear, consumer electronics etc

Component vendors would also follow-source the OEM to new manufacturing locationsElectronics component manufacturing is driven primarily by economies of scale

As witnessed in China and Brazil, component manufacturers follow-source OEMs to electronics manufacturing locations

Due to multiplicity of applications of components across electronics segments, they would evaluate opportunities across the electronics chain

This could also be an opportunity for Indian manufacturers to develop large-scale component manufacturing capabilities for OEMs setting base in IndiaHowever, there is a need for putting in place critical enablers for component players such as environmental clearances and facilities for hazardous waste disposal

The key drivers that would favorably impact the Indian handset manufacturing business case are

1OEMs manufacture a significant proportion of handsets sold in the Indian market in India2OEMs use India as a key location as part of their global sourcing strategy3Emergence of Indian brands in the market

The success of Chinese handset brands indicate that there could be potential for Indian brandsChinese brands constitute 37% share in Tier-1/2 towns; 50% in Tier-3 and Tier-4 townsChinese brands such as Bird, TCL, Konka and Amoi have 25 percent market share in ChinaDesign and R&D capabilities enable models catering to the Chinese marketAdvantages enjoyed by local players due to local design and R&D facilitiesChinese players produce clam-shell phones which makes up 60 percent of the Chinese marketMultinational firms that serve global markets took time to customize phones with clamshell designsLocal players were quicker in designing phones with Chinese charactersWere able to capitalize on locally manufactured mobile handset componentsChinese players used localized design and local components to produce low-cost phones, and have now become large players in the Chinese marketplace37%

On similar lines, there could be room for Indian brands catering to the Indian marketThe Indian mobile market is at a point where potential explosive growth would come from first-time users in small towns and rural markets; which are price-drivenIndian players with a strong distribution network and experience in the Indian marketplace could use their strengths to establish strong Indian brandsPotential export potential as the emerging set of first-time Indian mobile users are similar in profile to emerging markets in South East Asia, Africa etcThese players could use existing and upcoming EMS manufacturing facilities in India to quicken the pace of product developmentThe critical point here is that handset manufacturing in India would be an opportunity for Indian players across the value chain from being OEMs to being EMS to becoming component vendors

Key Recommendations

Key Policy Recommendations to promote Handset Manufacturing in IndiaFiscal incentives for manufacturers tax benefits, depreciation, capital subsidiesWorld-class infrastructure through hardware parksTailored strategy to engage global OEM top management/ supply chain teamsInvest in component manufacturingCertification program to ensure high-quality Indian componentsSubsidized cost of funds for component manufacturersArm to promote electronics research and manufacturingPromote Venture funds for electronics sectorGrants to universities for telecom technology researchSHORT TERMMEDIUM TERMThe most critical aspect of government policy would be to develop a stable long-term strategy for handset manufacturing and component sectorsIncentivize LocalManufacturingInvest in component mfgInvest in R&DReduce supply chain bottlenecks Proactive measures to streamline customs proceduresSimplified measures for bonded storage of imported components

Incentivize local manufacturing-- Fiscal IncentivesPromote awareness about the benefits of the EHTP/ SEZ schemes which makes India a key electronics-friendly destinationFiscal holidays and capital goods depreciation would make India at par with other manufacturing destinations on incentives

Policy LeverChinese policyRecommended Indian policyRationaleTax Holidays5-year tax holiday; Taxation at half-rate for next five years10-year tax holidayExceed fiscal incentivesDepreciationCapital goods depreciation allowed in three yearsCapital goods depreciation allowed in three yearsMatch/ exceed fiscal incentivesVATEffective VAT rate of 3-6 % for local manufacture vs. 17% for imported goodsUniform VAT rate for mobile phones across all states at 4%Under the present zero duty regime on handsets; differential VAT could be used to incentivise local manufacturing

Incentivize local manufacturing-- Promote Handset Manufacturing ClustersProvide world-class infrastructure in identified Manufacturing Clusters including good road and rail connectivity to the nearest airportTargeted subsidies till 2009 to make power available at competitive rates and/ or funding dedicated IPP sources for handset manufacturing parks

Incentivize local manufacturing-- Tailored strategy for OEMs & component suppliersProactive measures to attract global OEMs and their supply chain partners by reaching out to potential investorsIncentivize component suppliers to set up operations in Indian Hardware ParksClarity in taxation of components manufactured locally for repair/ servicing

Streamline supply chain bottlenecks-- Implement Efficient Customs Procedures Efficient Customs clearance is a critical enabler for a Handset Manufacturing facility in the first year as most components would be importedIt can take upto 10 days for customs clearance in India while comparable cargo processing time in Dubai and Singapore is a few hours; this results in disrupted production schedules and added costs for Indian manufacturersRound-the-clock operations including weekends and holidaysAutomated electronic cargo processingPre-clearance as an option for designated units with no physical inspection of inbound goods; utilizing periodic audits if requiredDedicated unit at the port/ airport for obtaining clearances for handset component imports for handset manufacturers

Invest in electronics component segments in the medium termOne of the key findings of the study has been the critical need for a local component manufacturing baseA robust component vendor base would allow for customization opportunities and potential for cost reduction opportunities; Electronics firms may be tempted to migrate to further lower cost destinations and locations that offer better incentives, unless there is a robust components sector in the country that provides a sustainable competitive edgeThis would further promote across the board electronics manufacturing as electronic components typically multiple applications across productsTargeted policy to promote component manufacturing through incentives such as subsidized cost of funds for manufacturers This can be achieved through an Open Cluster model that attracts component manufacturers with multi-use applications

Invest in R&D in the medium termInvestments in R&D would provide a boost to manufacturing capabilities and skill sets both in handset and components manufacturingAs witnessed in Taiwan, focused investments in R&D in strategic sectors could lead to the development of a highly competitive Indian electronics manufacturing sectorAnnexure C describes steps taken by the Taiwanese govt. to promote the Taiwan electronics industry starting from the 1950s through the start of the new millenniumAgency to promote electronics research and manufacturing in the country on the lines of the ITRI in TaiwanEngage with financial institutions (FIs) to promote Venture funds for the electronic components sectorProvide grants to universities for targeted telecom research to develop products and technologies catering to the Indian and global market;

Handset Manufacturing Value ChainAnnexure A

Given the complex value chain, handset OEMs carry out production in-house as well as outsource manufacturing and design COMPONENTVENDOREMSODMHANDSET VENDOR (OEM)ComponentsDesignManufacturing Sales & Marketing MAPPING KEY ENTITIES IN HANDSET MANUFACTURING TO THEIR PRIMARY ACTIVITIES

PlayerDescriptionRepresentative FirmsHandset Original Equipment Manufacturer (OEM)End-to-end handset value chain design, manufacturing, distribution and brandingNokia, Motorola, SamsungOriginal Design Manufacturer (ODM)Designs and contract manufactures for the OEM Arima, Compal, BenQElectronic Manufacturing Services (EMS)Contract manufacturer to the OEMFlextronics, Celestica, Elcoteq, SolectronComponent ManufacturerSpecialist vendors producing components such as antennas, LCD screen etc Perlos, Allgon, Murata, TDK, Savcor

1. IC Fabs being Capital Intensive, Most Firms prefer a Fabless model with manufacturing by Taiwanese and Chinese foundriesSpecialist firms like Nvidia, Infineon and Skyworks follow a fabless model; outsourcing productionLarge companies such as Intel, Samsung and Motorola follow a mixed model of manufacturingHighly capital intensive with each new wafer fab costing between USD 1-2 billionWafer fabs located mostly in Taiwan, Korea and ChinaManufacturing dominated by Taiwanese wafer fab companies TSMC and UMC (Operating margins of 10-15 percent)China is the hot location with 56 fabs already established and more in the pipelineChinese semiconductor industry projected to grow to USD 77 billion by 2008 by CCID Consulting, the Chinese research of Ministry of Information Industry Baseband ProcessorApplications ProcessorMemoryRF/ Power modulesTexas InstrumentsMotorolaQualcommAgereAnalog DevicesInfineonARMIntelMotorolaST MicroTexas InstrumentsSamsungNvidiaToshibaIntelSamsungSandiskM-SystemsHitachiPhilipsTexas InstrumentsInfineonSkyworksRF MicroDevicesAnalog DevicesQualcommSilicon Labs

2. Though only 8 percent of BoM, passive components have the widest application among all electronic components USD 40 billion industry worldwidePassive components consist of high-precision resistors, capacitors, inductors and filtersIn-depth knowledge of material sciences (ferrites, ceramics, Niobium, Tantalum etc) and high-precision and miniaturization involved70 percent of production in Asia; dominated by Japanese manufacturers such as Murata and TDK Highly R&D intensive; 6-8 percent of revenuesGlobally, sales occur primarily through distributors or through direct sales to OEMsPlayers like EPCOS have existing distribution in India catering to consumer electronics and PC peripheralsWide Range of ApplicationsSource: EPCIAPassive ComponentsIntegral to all electronics manufacturing

3. PCB Fabrication is a quick-win; SMT production lines can be moved as-is Semi-automated process using CNC machinesInvolves chemical and electro-mechanical processes; current technology - SMTDominated by the Electronics Manufacturing Services (EMS) such as Flextronics, Solectron, Jabil and ElcoteqVery low operating margins; 1-2%Scope for labour arbitrage; manufacturing in low cost locations such as China, Mexico, Eastern Europe etcEnvironmental regulations on manufacturing lead-free soldering process Application across all electronics industries; different precision and miniaturization requirements Handset PCBs are usually double-sided, have 15-30 ICs and close to1000 components on them; connection density of 50 components per sq cmPCB fabrication processBoard LoaderScreen PrinterBoard ConveyorChip ShooterPick n PlaceReflow OvenBoard invertorWave solderFlip side of PCB copper conductor patternEMS would move their SMT lines

4. Specialist vendors for modular components typically follow-source OEMs as they move production baseRange of items such as LCD, speaker, microphone, connectors, antenna, battery, buzzerManufacturing involves a range of electro-mechanical, moulding and precision processesGlobal base of specialist vendors such as Allgon, Filtronic (antennas)Sanyo (batteries)RF Micro devices, Ibiden Energy (RF power modules)Samsung (TFT LCD screens)Scope for technology-transfer through JVs; components for these sub-assemblies

5. Plastic parts 6. Box build assemblyHigh potential for localization in both plastics and box-build activities

Handset Components- Manufacturing LandscapeAnnexure B

Components of the handset BOMSemiconductor ICsPassive ComponentsPCB Fabrication23 Modular Comp/ Subassembly4Box-build Assembly6

Enclosures/PlasticParts

5Testing71

While the technology pioneer may differ by component, China has emerged as the preferred manufacturing location for many componentsChinese component players have successfully used global scale of operations to manufacture basic electronic components at the lowest cost

Component DescriptionTechnology Leader (Country)Manufacturing Location(s)Integrated Circuit (ICs)USA,Japan, KoreaTaiwan, ChinaPassive componentsJapan, EuropeJapan, Europe, Taiwan, ChinaPCBJapan, Korea, TaiwanKorea, ChinaAntennaSweden, TaiwanSweden, Taiwan, ChinaLCDKoreaKorea, Taiwan, ChinaBuzzer, speakerHong Kong, ChinaChinaBatteryJapan, KoreaChina, Korea, JapanHandsfree headsetUSA (Bluetooth chip) Taiwan, HK (Bluetooth headset) Taiwan, HK, China (Bluetooth)China (wired) Phone housing, keypadChinaChina, KoreaDIN Connector, ElastomerJapan, Korea (Elastomer)China, Korea

This scale of operations has been achieved by focusing on growth through different levers Levers to increase scale of manufacturing: multiple industries (e.g. PCB for PC, peripheral, handsets) product range (e.g. mobile phone battery, charger, handsfree) geographies (serving export markets, OEM market) Multiple industryProduct rangeGeography/Multiple OEMManufacturer 1Manufacturer 2Products/ applications that are manufactured togetherComponent manufacturers develop scale economies by manufacturing multiple products for a range of industries GROWTH LEVERSComponent typeLCDPCB

Products Mobile phone battery Mobile phone chargerHandsfree setChip resistor VaristorMLCC Chip inductorBuzzer Speaker MicrophoneMobile housing, Keypad Elastomer/ connector

Applicationshandset PDA Other mobile devicesPC Peripherals HandsetsPassive components across electronicsConnectors across PC, peripheral, handset

Passive components (Chip capacitors and inductors)-- Boost in capacity to meet demand Size of Market:USD 20 Bn ^

Applications:Handset, consumer electronics, auto electronicsKey players:TDK (Japan)Matsushita (Japan)Epcos (Europe)Eyang Tech (China)Yageo (Taiwan)

Japanese makers target high-end market while Chinese players target mid and low range markets Manufacturing locations:JapanChinaEuropeTaiwanManufacturing scale:2 to 20 Bn units p.a. Industry Characteristics:Global demand for chip capacitors Yoy price reduction of 20 percent since 2001Prices expected to remain stable because of raw material prices such as Copper, Aluminium and NickelPrice ranges from 0.6c to 13c depending on the grade and rating of the capacitorProduct Trends:Aluminium electrolytic, thin-film and MLCC capacitors

Passive components (Chip resistors & varistors)-- Boost in capacity to meet demand Size of Market:N.A.

Applications:Handset, consumer electronicsKey players:TDK (Japan)Matsushita (Japan)Koa (Japan)RohmChangzhou Hylink (China)Yageo (Taiwan)Manufacturing locations:JapanChinaEuropeTaiwanManufacturing scale:100 Mn units p.a. (Varistors) 30-50 Bn units p.a. (Ch resistors) Industry Characteristics:Global demand for varistors expected to be 10.5 Bn units by 2005Global demand for chip resistors expected to be 400 Bn units by 2005 No hike in prices expected despite 10 percent increase in raw material costExtremely competitive chip resistor market with razor-thin marginsProduct Trends:Shift in raw material for varistors from Zinc oxide to Strontium Titanate (SrTiO3)Move to further increase miniaturizationPreference for high precision and lead-free technology Japanese makers target high-end market while Taiwanese/ Chinese players target mid and low range markets

Printed Circuit Boards (double-sided)-- Significant investment in R&D to achieve technology leadershipSize of Market:~USD20 Bn ^

Applications:PC, peripherals, handset, network eqpt, consumer elx ^estimatesKey players:CMK (Japan)Kyoden (Japan)Samsung Electromech (SEM) (Korea)Compeq (Taiwan)Nanya (Taiwan)Manufacturing locations:JapanChina (Yangtze and Pearl River Delta)KoreaManufacturing scale:250,000 to 750,000 m2 p.a.SEM (10 Mn m2 p.a.) Industry Characteristics:China has 700 PCB makers with a capacity of 60 Mn m2, while Hong Kong has 300 PCB makersIn Korea, Samsung and LG have an integrated strategy with significant PCB production facilitiesSignificant investment required in R&D to develop fine pitch PCBs and substrates, with investment in new equipment due to shorter PCB technology life cyclePrice of CCL (copper clad laminate) makes up over 50 percent of PCB cost has risen significantlyFocus on Pb-free and halogen-free environmentally friendly plating methodsProduct Trends:Japanese are technology leaders producing high-end (10-16 layer) boards for notebook PCs, handsets, network equipment etcLarge number of small-scale PCB makers contributing to low-end consumer electronics requirements Japan is the technology leader, while China leads the mid/low-range consumer electronics market; Korea is a significant player catering to Samsung and LG

Mobile Phone Antenna-- Dominated by a few European RF design and manufacturing firmsSize of Market:N.A.

Applications:Mobile HandsetKey players:Allgon (Sweden)Centurion (USA)Filtronic (Sweden)Moteco (Sweden)How Tsen (Taiwan)Industry Characteristics:Dominated by 2-3 European players, with >80% market shareAcquisitions Perlos acquired Moteco; Centurion acquired AllgonChinese/ Taiwan players focused on cordless phone antennas; less successful in mobile phone antenna market thus far;Move by low-cost Taiwan/ Chinese cordless phone antenna firms into this space could lead to increase in pricing pressuresProduct Trends:Key CSFs -RF design and R&D skills; product quality control and strong relationship with handset OEMsMove towards miniaturization and space-saving technology (e.g. embedding speaker within antenna)Manufacturing locations:SwedenChinaTaiwanManufacturing scale:N.A.RF design and R&D skills the key to this market

Buzzer-- Asian manufacturers ramping up capacitiesSize of Market:N.A.

Applications:Handset, PDA, auto electronicsKey players:Chinese, Taiwan & Hong Kong based manufacturers

1,000 buzzer manufacturers in ChinaIndustry Characteristics:Growing demand from mobile phone and consumer electronics industriesExtremely competitive market due to large number of playersChinese players on an average 50 percent cheaper than TaiwaneseProduct Trends:Trend towards miniaturization 10mm x 3mm dimensionsFocus on R&D to achieve better miniaturization and SMT capabilityExtremely competitive market consisting of Chinese and Taiwan players Manufacturing locations:China(Jiangsu and Guangdong)TaiwanManufacturing scale:20-30 million units p.a.

Micro-speaker-- Mainland China is the largest supplierSize of Market:N.A.

Applications:Handset, PDA, LaptopsKey players:Matsushita (Japan)Yat Sun (Hong Kong)DB products (HK)BeStar (China)

2,000 manufacturers in ChinaIndustry Characteristics:Intense price competition Very sensitive to input raw material prices (magnet cost makes up 25 percent of product price)

Product Trends:Multiple apps receiver, speaker and vibrator (3-in-1) application on a single chipR&D in materials, miniaturization and SMT characteristicsPolyphonic sound; human voice frequency generationExtremely competitive market with manufacturing concentrated in China Manufacturing locations:China(Jiangsu, Fujian, Shejiang and Guangdong)Manufacturing scale:40-100 million units p.a.

TFT LCD technology screen-- Korea is the leader in LCD technologyUSD MnGlobal Flat Panel Display Production Source; ITRI, TaiwanKey players:Samsung SDI (Korea)LG (Korea)Philips (Europe)Sharp (Japan)AU Optronics (Taiwan)

Manufacturing locations:ChinaKoreaTaiwanJapanManufacturing scale:N.A.Industry Characteristics:Samsung SDI is the technology leader in LCDs, and is the leading supplier of LC panels (which makes up over 80 percent of the cost of a LCD monitor)Taiwan is the leading player in LCD monitors in the world with a 60+% market share, over 80% of this production takes place in ChinaLG, Samsung and Philips have significant LCD monitor manufacturing centres in ChinaSamsung SDI is the technology-leader in LC panels, the key constituent of LCD monitors Product Trends:TFT LCD (thin film technology) is the dominant technology in mobile screen, replacing C-STN technology64k/ 110k/ 256k color TFT LCD screens are widely used TFT LCD screens, with 64k/ 110k screen used by low-end color handset makers

Battery and Adapter (1 of 2)-- South Korea captures significant marketshare from JapanSize of Market:USD 3 billion

Applications:Handset, PDA, Laptops, Portable electronic devicesKey players:Sanyo (Japan)Sony (Japan)LG Chem (Korea)Samsung SDI (Korea)BYD (China)

Industry Characteristics:Industry segment was dominated by Japanese players such as Sanyo and SonyCurrent move towards Korean players like LG and Samsung acquiring 20% of the marketIntense price competition (price of the Li-ion cell has been falling 10% p.a. since 1990)Shakeout in industry has resulted in Chinese players declining from 200 to 50 in the past two yearsIndustry Requirements:Support infrastructure for the manufacture of battery packs Subcontractors for molding requirements with plastic injection equipment Capacitor and cables suppliersPackaging materials suppliersManufacturing locations:JapanKoreaChina (Pearl Delta - Shenzen, Dongguang)Manufacturing scale:15-20 million units p.a.Investment scale:USD 300 Mn (Samsung/ LG)USD 10 Mn (China/Taiwan) Contd

Battery and Adapter (2 of 2)-- Technology trendsExtremely competitive market with manufacturing concentrated in China Source: Global Sources IncProduct Trends:Demand for Ni-Cd batteries has fallen off due to environmental concerns regarding production processesMove towards smart packs that monitor battery life Demand booming for Li-ion batteriesFOB price of Li-ion cell USD 3-5, while that of a Li-polymer cell is USD 4-6FOB price of a Ni-MH cell is USD 2

Hands-free set -- Shakeout in manufacturing unitsSize of Market:USD 300 Mn ^

Applications:Handset, PDA

^ estimatesKey players:

Dominated by 100-odd manufacturers in China with 5-10 years experience in handsfree development

Extremely competitive market with manufacturing concentrated in China Manufacturing locations:China (Guangdong and Zheijiang)Manufacturing scale:5-6 Mn units p.a. Industry Characteristics:Industry has just emerged from a shakeout with number of players reducing from 300 to 100Price of handsfree set varies between 10c (basic) to USD 3 (high-end) Raw materials and components (speaker, microphone) sourced locally (except cables from Japan for radiation protection)Product Trends:Design-driven - Attractive product range with innovative features. Each firm offers 40 to 60 modelsAfter experimenting with FM radio models, theres a shift back to basic sets

Bluetooth Hands-free set -- Price would the key to rapid adoptionSize of Market:USD 300 Mn ^

Applications:Handset, USB dongles for laptops

^estimates

Key players:Audex Telecom (Taiwan)Antonio Precise (H.K.)Innovi (H.K.)

With proportion of bluetooth phones expected to increase to 70% by 2007, adoption of bluetooth equipment is expected to increase significantly Manufacturing locations:TaiwanChinaHong KongManufacturing scale:1 Mn units p.a. Industry Characteristics:Prices reducing from USD30 to USD20 (for mono) and USD50 (for stereo headsets)Technology driven segment with price of the Bluetooth 1.1/1.2 chip costing USD 6Export driven market hence CE and FCC BQB certification essential for RF and protocol conformancePrices likely to drop further with increased Bluetooth IC production in Taiwan Product Trends:Product quality, especially in acoustic performance is the key focus for R&DHigh end bluetooth headsets with radiation cancellation use high-end cables imported from JapanNext generation products include bluetooth GPS receivers

Mobile phone charger -- Short product life cycle leads to frequent drops in price Size of Market:USD 400 Mn ^

Applications:Handset, PDA

^estimates

Key players:Shenzen Huaye (China)Great Well (China)

Over a hundred Chinese manufacturers with a dozen having large capacity plants

Extremely competitive market with manufacturing concentrated in China Manufacturing locations:China (Guangdong)Manufacturing scale:4 Mn to 12 Mn units p.a. Industry Characteristics:Use of imported components such as current overload sensors and circuit protection componentsFocus on high-quality products (with short circuit protection) and CE/ FCC certificationFOB price varies between 50c and USD 2 (frequent drop in price due to short product life cycle)Product Trends:Little scope for product differentiationNiche applications such as USB, travel, car, solar, emergency and multi-function chargers

Connectors with different configurations have applications across the electronics value chainIn China itself, there are over 1,000 manufacturers who manufacture different types of connectors and interconnect components for a range of equipment

Connectors (Elastomers)-- Focus on R&D to improve precision Size of Market:USD 30 Bn

Applications:Handset, consumer electronics, watches(connects LCD, speaker, microphone, buzzer to PCB) Key players:Tyco Electronics (Japan)Perlos (Europe)Akira (Taiwan)

50 firms in China(12% of global market)Manufacturing locations:JapanChina EuropeTaiwanManufacturing scale:120-500 Mn units p.a. Industry Characteristics:Focus on R&D to improve precision (e.g. 0.03mm pitch)Key inputs include silicone, rubber and copperClose to customers (LCD screen makers etc)Price of zebra elastomers ranges between 50c and USD 2.50 Product Trends:Variants come in gold and silver connector categories but these are 20 times as expensive as carbon connectorsTypical precision involved (0.03 to 0.1mm)Custom-made connector solutions for OEMs required

Connectors (metallic connectors)-- New applications in mobile phones drive demandSize of Market:N.A.

Applications:PCs, PC peripherals, Handset I/O Key players:Yuquiu Electronics (China)Junper Interconnect (China )

Over 180 manufacturers in ChinaManufacturing locations:ChinaManufacturing scale:30-50 Mn units p.a. Industry Characteristics:DIN connectors primarily served the I/O connector needs for PCs/ peripherals such as mouse and keyboards; however demand has fallen with popularity of USB connectorsCost of key raw materials like copper, steel and plastic have risen significantlyCertification such as CE, FCC, UL etcPrice per DIN connector is 12c The sector is adopting alternate applications in mobile phones to make up for the loss to USB connectors in PCs

Mobile phone housing -- Short product life cycle leads to frequent drops in price Size of Market:N.A.

Applications:Handset, PDA

^estimates

Key players:Best Wisdom (China)Bohong (China)CTC (China)Boomax (China)

200 manufacturing units produce housings in ChinaChinese vendors work closely with OEMs providing short lead time and variety Manufacturing locations:China (Shenzen, Guangdong)Manufacturing scale:2 Mn to 20 Mn units p.a. Industry Characteristics:Integrated players producing housings, battery packs, chargers etcProvide design facilities to key handset manufacturers with short lead timesPrice of base housing has fallen to 10c, while Al alloys and Titanium finish housings can cost up to USD10Product Trends:Firms offer 500 housings to OEMs with 50-100 new housing variants released every week on average

Keypad -- Short product life cycle leads to frequent drops in price Size of Market:N.A.

Applications:Handset, remote control, LCD keys

Key players:General Silicones (China)Jiehong Electron (China)

200 manufacturing units produce housings in ChinaVendors work with OEMs on product design, materials and specifications Manufacturing locations:ChinaTaiwanKoreaManufacturing scale:1 Mn to 100 Mn units p.a. Industry Characteristics:Cost of key components include rubber and silicone have risen significantlyPrice of keypads in range of USD 1 to 3 for conductive keypads; and 10c to 20c for rubber keypadsKeypad makers offer one-stop service through an integrated model - from silicone rubber producing equipment, to design, mould making, production and printing Product Trends:Keypad makers focus on becoming OEMs to key handset manufacturers; hence focus on working with customers on product design, product characteristics and materialsKey operating characteristics include actuation force (50gF), lifespan (3 Mn cycles), tensile strength etc

Summary of key activities taken by Chinese component manufacturers to develop global scale These are critical lessons for Indian component manufacturers looking to become vendors to the Indian handset manufacturing industry

Policy Case StudyAnnexure CTaiwan Electronics Industry

Taiwan has grown remarkably over the past decade...Source : KPMG Analysis, WTEC reports, World Bank, unido.orgManufacturing export has led strong growth in Taiwan...

The industry has evolved from a low-end assembly of products to high-end precision manufacturing 1960s1970s1980s1990sElectronics AssemblyComponents ManufacturingComputer ManufacturingMicroelectronics ManufacturingTransistor radio production1963 B/W TV production1966 Tape recorder production1969 Color TV production1969 First favorable balance in electronic product trading1970 B/W CRT production1974 Establishment of ESRO1977 CMOS IC pilot production1978 Electronic watch production1979 VCR magnetic drum developed by Tatung1982 UMC starts IC production1982 Tatung VCR delivered; color monitor production1985 ERSO develops IBM PC/AT1985 256K DRAM developed1986 Color Monitor1987 Fifth PC supplier1987 TSMC1991 # 1 supplier of motherboards, monitors, scanners 1995 # 3 in computer production value1995 16M DRAM mass production1995 4 (8) fabs start production; 10 (8) fabs under construction; 5 (8) fabs plannedIncreasing Manufacturing Value Added

The evolution to a high technology manufacturing base has been spearheaded by the government in collaboration with industry, research institutes & academiaGOVERNMENT

NSCMOEA

INDUSTRIES

Foreign Companies

UNIVERSITIES

RESEARCH INSTITUTES

Source : KPMG Analysis, WTEC reports, World Development Report 2000NSC* : National Science CouncilMOEA^ : Ministry Of Economic Affairs

The evolution to a high technology manufacturing base has been spearheaded by the governmentGOVERNMENT

NSC*MOEA^

INDUSTRIES

Tax Deduction IncentiveMatching Fund program

UNIVERSITIES

RESEARCH INSTITUTES

Academic Research ProgramKey Technology Development ProgramUniversity Industry Link ProgramTechnology Assistance ProgramResearch Institute Industry Link ProgramIdentifies strategic industries, technologies on priority for developmentOversight of science based industrial parksNational LaboratoriesSupports academic researchDevelopment center for BiotechIndustrial Technology Research Institute (ITRI)Funding of technology development programsProvides incentives & Matching fundsThe Taiwanese government proactively identified 10 growth industries that would receive support and incentives

The government had a 7 point agenda to promote priority industries Provide R&D and plant investment assistance for selected productsEncourage technology transfer to ensure self reliance in key technologiesCreate a favorable climate for High Value Added and low cost R&D, production and marketingStrengthen upstream industries to support middle and downstream development systems and vertical industry integration1234Utilize government purchasing projects to obtain foreign expertise and technology5Encourage fair competition in the domestic market with update laws and regulations6Co-ordinate agencies to establish development plans for top key industries7

ITRI- A government sponsored non-profit organization had led the high tech drive in Taiwan

RESEARCH INSTITUTES- ITRI

GOVERNMENT

NSCMOEA

INDUSTRIES

Tax Deduction IncentiveMatching Fund program

UNIVERSITIES

Academic Research ProgramKey Technology Development ProgramUniversity Industry Link ProgramTechnology Assistance ProgramResearch Institute Industry Link ProgramITRI is the sole source of R&D for most Taiwanese companies as they are too small to afford R&D and is the driver for the government - industry co-operationPromote development of high tech industryImprove domestic product designImprove processing technologiesTechnical assistance to industryAssist in development of defense technologyOver 5700 engineers work in ITRI

The government and the research institutes identified critical components for technology development in Taiwan Group AGroup BGroup CResearch Institutes like ITRI to develop technologyMOEA to employ government assistance for qualified manufacturers to conduct development planGovernment to provide investment incentives to manufacturers Critical products*

HDTV Digital audio tape recorder Projection TV Electronic still camera Multifunctional clinical analyzer Ultrasonic diagnostic equipment Engineering work stations Multi processor system High resolution page printer High performance scanners Optical disk drives Micro disk drives Digital mobile phones Aircraft IC Memory

Critical Components* Fuzzy IC Si Wafer LCD display DAT Mechanism DRAM > 4M Micromotor System software and tools ISDN interface IC Thin film disk head Broadband communications IC Laser Diode Chip Micro fiber A spherical Molder Lens Anti vibration rubber

Source : KPMG Analysis, WTEC reports, ITRI-Taiwan* : Not an exhaustive list

Taiwanese institutions are geared to commercialize high technology through a systematic processIdentifyInvest, Incubate Or TransferDiffuse Key high tech industries are identified and list of critical products and critical components prepared

These industries become the priority- as they will be driving growth in the future Group A Technology : Research institutes like ITRI will apply own technology in development

Group B Technology : MOEA to provide assistance to qualified manufacturers to develop technology

Group C Technology : Help in transfer of technology to Taiwan by encouraging foreign firms to set up etc

Provide incentives to firms that take lead in technology development Diffuse technology to the private sector / market as soon as possible

If technology development is by research institutes like ITRI or ESRO- programs are spun off after 4 years, when technical base is adequate

License technology from global leaders for use in Taiwan- to develop local industry and generate revenues

Encourage local firms to apply for patents

Negotiate flat royalty rate with global leaders in technology to reduce product costs and risk of law suits

Spin off research teams, transfer talent to industry- Over 11,000 people have been transferred to private firms from ITRI aloneSource : KPMG Analysis, WTEC reports, ITRI-Taiwan

Further the government established an Industrial park to foster and develop high tech products... 1980- Government Establishes Hsinchu Industrial Park2 National Universities170 Firms in 199525 % firms foreign ownedITRIProximity to portProximity to Airports51 Semiconductor firms9 Biotechnology firms30 telecommunications firms39 PC peripheralfirms..and provided incentives for High tech companies in the Industrial parksOne stop permits and special incentives5 Year corporate income tax exemptionTax credits for investments in R&D, Factory automation & HRD supportDuty exemption on imported components,equipment & materialsSales of $ 6.4 Billion in 1994

Reasons for success...Focused thrust on the identified priority industriesStrong Government, Industry, Research Institution & Academia interlinkagesFavorable market friendly Government policiesStrong human capital accumulation1234Macro economic stability5Taiwan was untouched by the Asian financial crisis as most companies are small and are allowed to go bankrupt while new ones are being formed

PROFILE - INDIAN CELLULAR ASSOCIATION Indian Cellular Association (ICA) is the apex body of the mobile industry comprising manufacturers, brand owners, application and solution providers, Value Added Service providers, distributors, retailers and eminent consumers of mobile handsets. The Association has been constituted to provide value and service to the mobile cellular industry in India by fuelling its growth, improving competitiveness, helping create a legal and ethical market, thereby providing long-term benefits of mobile connectivity to the Indian masses.Contacts:Pankaj Mohindroo National PresidentIndian Cellular Association 1107, Ansal Bhawan 16 Kasturba Gandhi Marg New Delhi-110001 Tel: EPABX - +91-11-66303663Tel: Dir. +91-11-41520586Fax: +91-11-66303664 Mob: +91-9810022022 E Mail: mpankaj@del2.vsnl.net.in, pankajm@ica-ind.orgAdarsh ShastriNational SecretaryIndian Cellular Association1107, Ansal Bhawan 16 Kasturba Gandhi Marg New Delhi-110001 Tel: EPABX - +91-11-66303663Tel: Dir. +91-120-2442115Fax: +91-11-66303664 Mob: +91-9811990613E-mail: adarshs@ica-ind.org

About KPMG in IndiaKPMG in India was established in September 1993. As one of the KPMG firms that serves the Middle East and South Asia (KPMG's MESA business unit), they can respond to a client service environment by leveraging the resources of a globally aligned organisation and providing detailed knowledge of local laws, regulations, markets and competition.In India KPMGs range of services includes audit, tax and advisory services toover 2,000 international and national clients. Clients range across five sectors namely financial services; consumer markets; industrial markets; information, communication and entertainment; and infrastructure and government. KPMG has offices in India in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Kolkata and Pune. The firms in India have access to more than 1500 Indian and expatriate professionals, many of whom are internationally trained.For more information on the telecom industry and KPMGs manufacturing expertise, please contact Partha BardhanExecutive Director4B DLF Corporate ParkDLF City, Phase IIIGurgaon 122 002eMail: pbardhan@kpmg.comTel: +91 124 3074000Fax: +91 124 2549140Rajesh JainExecutive DirectorKPMG HouseKamala Mills Compound448, Senapati Bapat MargLower Parel, Mumbai 400 013eMail: rcjain@kpmg.comTel: +91 22 39896000Fax: +91 22 39836000R VenkatramanExecutive DirectorWestminster Building, II Floor108, Dr. Radhakrishnan SalaiMylapore, Chennai 600 004eMail: vr@kpmg.comTel: +91 44 28473911Fax: +91 44 28473912

in.kpmg.comMumbaiKPMG HouseKamala Mills Compound448, Sena