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Elcoteq takes telecom EMS to India

Posted: 16 Sep 2005 ?? ?Print Version ?Bookmark and Share

Keywords:elcoteq? ems? communications technology? mobile handset? pda?

The India incentives

    Major benefits under the Export/Import Policy 2002-2007 can be summarized as follows:
  • Foreign equity up to 100% is permissible.
  • Duty free imports of capital goods, components and other inputs.
  • Access to the India domestic market is allowed up to 50 percent of the FOB value of exports, subject to positive Net Foreign Exchange earning as a Percentage of Exports (NFEP).
  • An EHTP can be set up for integrated software and hardware operations as long as the minimum NFEP for the software component is 20 percent and domestic sales are restricted to 50 percent of FOB value of exports.
  • Sales to the domestic tariff area (DTA) from the EHTP units are subject to 50 percent of the duties levied on like goods imported.
  • Supplies made from the DTA to EHTP are eligible for the benefits of deemed exports.
  • Tax deductions are allowed for units that are established in any Free Trade Zone, EHTP, Software Technology Park or Special Economic Zone, units that are 100-percent export oriented, and units that provide software or software-related services outside India. Tax holidays for the first two types of companies will be phased out in 2009.
  • Source: Elcoteq

    Elcoteq Network Corp., a Finland-based EMS company focused solely on the communications technology segment, has established assembly operations in Bangalore, India. The EMS provider will initially concentrate on high-volume low-mix products such as mobile handsets and PDAs, as well as manufacture some network equipment.

    Its 5,400m? facility, scalable to 13,500m?, is expected to employ about 1,000 staff when fully operational by the end of 2006. The facility will require $50 million to $100 million investment, depending on how demand drives the scale of operations.

    Keindnen: Elcoteq recognizes the Asia-Pacific as one of the fastest growing areas.

    The Bangalore facility expands Elcoteq's volume production in Asia into four plants. The other three are in ChinaBeijing, Dongguan and Shenzhen. "Elcoteq recognizes the Asia-Pacific as one of the fastest growing areas, which also include Russia and South America," said Hannu Keindnen, president of Elcoteq Asia-Pacific. "We believe these regions will be the biggest sources of new business in the near future." Last year, the company initiated development not only in India, but also in Brazil and Russia.

    Like most electronics companies, Elcoteq has taken advantage of low-cost regions. "All our volume manufacturing plants today are in relatively low-cost countriesin Eastern Europe, China, India, or in South and "middle" America, including Mexico and Brazil," said Keindnen. With a turnover of about $887.97 million, Asia-Pacific accounts for about a quarter of Elcoteq's business worldwide.

    The Bangalore facility makes Elcoteq the first telecom-focused EMS provider in India. "The decision to go to there was strategically important," said Henry Gilchrist, director of business development and marketing at Elcoteq Asia-Pacific. "Firstly, the Indian market is growing more quickly than almost anywhere else in the world. Most of our customers and some potential ones have markets here in India. And obviously, we want to be there to service their needs. Secondly, this fulfills our global footprint. We provide services for our global customers to localize in the market. And we also look to help our local customers globalize."

    Gilchrist: The Indian market is growing more quickly than almost anywhere else in the world.

    Elcoteq considered a number of Indian cities to establish its facility. "We preferred the broader appeal of Bangalore, which is in close proximity to the R&D houses, some of our existing technology and component suppliers, and future development plans, which include an international airport in February 2008 and some major road works connecting Bangalore to the coast," Gilchrist added.

    As a fully-owned subsidiary of Elcoteq in Finland, Elcoteq Electronics India Pvt. Ltd was incorporated in June 2004. Elcoteq worked closely with the Indian government and received a number of incentives under India's Electronic Hardware Technology Park (EHTP) Scheme, including tax holidays and duty-free import of capital goods and raw materials.

    The central and state governments in India are "switched on" to the need to develop a robust manufacturing industry in India, according to Gilchrist. "We've been able to incorporate this company and build the facility in less than eight months, which in our global experience is extraordinary," he said.

    Gilchrist believes that while the skills necessary to support electronics manufacturing are available in India, companies just need to suitably focus their existing capabilities to take on opportunities in component supply. "There needs to be a catalyst, the government is focused, and investment starts," Gilchrist said. "Further down the road, it is entirely possible that we will see the emergence of more sophisticated assembly, such as displays."

    - Vivek Nanda
    Electronic Engineering Times-Asia

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