Beyond smartphones: Dixon, Optiemus, Bhagwati eye telecom gear to drive growth

Electronic manufacturing services companies are looking at telecom and networking products as the next growth lever.

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Telecom manufacturing is emerging as the next growth area for domestic electronics manufacturers who have focused on making handsets and smartphones.

With extensive experience in consumer devices such as mobile handsets, laptops and wearables, companies such as Dixon Technologies, Optiemus Infracom, and Micromax’s subsidiary Bhagwati Products are shifting attention to products such as routers for the home market and eventually expanding into exports.

The shift aligns with the government’s initiative to position India as a global export hub for telecom equipment through its production-linked incentive (PLI) scheme, analysts say.

The next growth lever

Dixon, the largest domestic EMS brand, sees telecom and networking products as the next growth lever.  The company recorded Rs 418 crore revenue from telecom manufacturing business  in the June quarter and is enhancing its capacities to meet customer demand, including from Finland’s Nokia.

“We have started mass production of 5G fixed wireless access devices (CPEs), along with GPON access points, ONTs, and internet set-top boxes,” Dixon managing director and vice chairman Atul Lall said during a recent earnings call.

It is manufacturing 5G fixed wireless access devices — outdoor and indoor units — for the domestic market, particularly for Nokia and has a healthy order book, Lall said. “The business is scaling up,” he said.

CPEs, or Customer Premises Equipment, are installed at the customer’s location to connect them to a service provider’s wireless broadband network.

Both Reliance Jio and Bharti Airtel offer 5G Fixed Wireless Access (FWA), or 5G broadband services, which require these CPEs and routers (GPON) to be set up at the customer’s premises for connectivity.

GPON is Gigabit Passive Optical Network that provides broadband access to homes and businesses, while optical network terminals (ONTs) connect a customer's premises to an optical network.

Plugging the China gap

Diversified electronics manufacturer Optiemus is in talks with several Taiwanese companies looking to enter the telecom equipment space.

Chairman Ashok Kumar Gupta recently told Moneycontrol there is an opportunity in the telecom space due to the absence of China's Huawei and ZTE.

“The demand for routers and outdoor and indoor microwave communication systems is enormous. These companies are evaluating the Indian market for an official entry, and we are in touch with them,” Gupta said.

Reliance Jio and Bharti Airtel’s focus on expanding fixed wireless access (FWA) and fibre-to-home broadband are pushing up the demand for routers and CPEs.

Dixon expects its joint venture with Airtel to yield results, as demand for CPE and routers grows. “It is relatively a smaller business but on a growth path,” Lall said.

Optiemus is making telecom devices through local and multinational original equipment manufacturers (OEMs).

“Indian companies must enter this space, as the market is vast and offers substantial growth opportunities, especially with Huawei and ZTE no longer supplying to telcos,” Gupta said.

Micromax’s subsidiary Bhagwati plans to scale up by applying for the PLI scheme. “We are waiting for the new PLI. When the government opens it to new companies, we will apply. We are already doing some business, and the PLI will benefit us,” Bhagwati Products director and Micromax co-founder Rajesh Agarwal told Moneycontrol on October 1.

Given the geopolitical scenario, India’s importance is rising as companies seek alternatives to China, creating new business opportunities, he said.

“American and European companies are open to manufacturing in India through local partners. All kinds of telecom products will come to India and we want to tap this opportunity,” Agarwal said.

This is a natural progression in the China-plus strategy for companies exploring new destinations, said Siddhant Cally, research analyst at Counterpoint.

“Many multinational firms seek alternate supply chains with similar dynamics and workforce capabilities. Geographically, India is strategically positioned to serve other countries, offering Indian EMS companies fresh business opportunities,” he said.

PLI push paying off

Home-grown and multinational companies' local production of telecom gear, leveraging the PLI scheme, has surpassed the Rs 50,000-crore milestone.

The telecom PLI scheme has attracted Rs 3,400 crore in investment over three years. India has become nearly self-sufficient in producing antennas, GPON, and CPEs.

According to government data, in FY24, exports amounted to Rs 10,500 crore, creating more than 17,800 direct jobs. PLI-approved vendors now export 5G equipment to North America and Europe.

During the year, PLI beneficiaries’ sales increased by 370 percent from the base year of 2019-20.

The scheme has significantly reduced the country's reliance on imported equipment, achieving a 60 percent import substitution rate, the government said.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.