Moto Plants Itself in India

Motorola Inc. (NYSE: MOT) announced Wednesday that it's opening a manufacturing facility in India, having designated the country as the headquarters for its High Growth Markets initiative late last year. (See Moto Invests in India.)

The vendor will initially invest $30 million in the facility near Chennai in southern India, eventually pumping in $100 million. The plant is expected to open next year and will manufacture handsets and wireless equipment for its Networks & Enterprise portfolio.

India’s mobile market is zipping along with more than 4 million new subscribers added every month, and Motorola is looking to ramp up sales of low-cost handsets as part of its strategy to connect "the next billion" wireless subscribers in emerging markets. (See Moto Touts Emerging Market .)

To that end it's scored a distribution agreement with Bharti Cellular Ltd. , India's largest wireless operator.

According to research firm GfK AG , Motorola, with a handset market share in the single digits, is jostling with Samsung Electronics Co. Ltd. (Korea: SEC) and Sony Ericsson Mobile Communications for second place behind Nokia Corp. (NYSE: NOK), which holds a whopping 70 percent of the Indian device market. Nokia has also set up manufacturing facilities in Chennai. (See Nokia Opens in India.)

On the networking side, vendors are scrambling to set up production facilities in India as state-run service providers issue major equipment orders that stipulate at least some of the gear should be manufactured locally. (See India Blocks Foreign Telecom Gear.)

The largest contract up for grabs is from Bharat Sanchar Nigam Ltd. (BSNL) , which is planning to spend around $4.5 billion to upgrade its wireless networks. (See BSNL Delays Wireless Deals.) The deadline for vendors to submit bids has been extended (again) to June 12, and Inder Singh, analyst at Prudential Equity Group LLC , believes the delay opens the door for Motorola to snatch a piece of the parantha.

In a note to investors, Singh lists the major contenders as Nokia, Ericsson AB (Nasdaq: ERIC), Alcatel (NYSE: ALA; Paris: CGEP:PA), Siemens AG (NYSE: SI; Frankfurt: SIE), and Motorola, with the former three as frontrunners. "We believe the delay could pave the way for underdog Motorola to emerge among the top-winners roster."

Part of the reason, he writes, is that the U.S. Commerce Secretary has reportedly "expressed concern over Motorola potentially losing a huge chunk of the deal to its European rivals," which have captured the tiger’s share of the Indian wireless market. "As a part of the overarching Indo-US trade negotiations, we believe that the Indian government may mitigate this concern by awarding Motorola a significant piece of the BSNL contract."

Singh reckons Motorola could be awarded the L-1 (lowest bidder) contract, worth 40 percent, or L-2 (second-lowest bidder) contract, worth 30 percent. "This would mean Motorola getting up to 40% of the contract ($1.92B), up from virtually nothing, in our previous view."

He adds: "We believe that this contract award could breathe new life into Motorola's ailing infrastructure business and offer it better prospects for future network upgrade to 3G by BSNL."

Motorola has six R&D centers in India, employing around 3,000 engineers. The vendor also said this week it plans to turn Singapore into its global supply-chain hub, investing an additional $60 million.

— Nicole Willing, Reporter, Light Reading

Be the first to post a comment regarding this story.
Sign In