US networking giant Cisco Systems announced a manufacturing plant in India in an attempt to broaden its global supply chain.
The factory is expected to be operational in 12 months and will generate $1 billion in total revenue including exports, said Cisco Chairman and Chief Executive Chuck Robbins.
“We are announcing strategic investments in Indian manufacturing capabilities as the next step in delivering cutting-edge technologies to our customers in India and across the globe,” Robbins said in a press conference in New Delhi on Wednesday. “India is a focal point of innovation and business for Cisco, and we remain deeply committed to our partnerships here.”
Cisco is building core manufacturing capabilities in India, including testing, deployment, and logistics, and expanding its in-house repair operations. It manufactures a range of networking and IT infrastructure products, mostly supplying to enterprises.
India is a lucrative bet for global tech giants
The trifecta of Indian R&D capabilities, manufacturing potential, and local market opportunities is creating an attractive value proposition or global MNCs to invest in the region.
India is already home to Cisco’s second-largest R&D center outside its home market in the US.
India is also an attractive domestic market with IT spending. According to IDC, India’s enterprise IT spending growth will be around 7.8% in 2023 despite challenging macroeconomic conditions and cost pressures.
Cisco’s strategy to have a manufacturing base in India will help deliver its products faster to its clients in a sector that has been plagued by supply chain issues.
Networking equipment has been a badly hit sector because of the supply chain crisis. The space is still struggling with backlogs and will take time to get back to normal.
“While Cisco’s initiative will not help solve the problem in the near term as the manufacturing set-up will take 12 months, it will definitely help ease any future supply chain shocks,” said IDC Vice President Sharath Srinivasamurthy.
Pace of 5G deployment is attracting investments in India
The announcement comes at a time when India is witnessing 5G rollouts at a massive pace.
“India has seen 5G deployments at a pace that we haven’t seen anywhere else in the world. And it really has created an amazing environment for investments,” Robbins said.
Industrial use cases of 5G seem to be promising and as adoption increases, the demand for next-gen secure networking equipment is going to increase, Srinivasamurthy said. “Cisco seems to be sensing this opportunity to consolidate and expand its position in this space.”
Cisco has manufacturing facilities in 17 countries including 5 in Asia: Korea, China, Taiwan, Malaysia, and Singapore.
Cisco has the option to scale up manufacturing in one of these countries such as Malaysia or look for other countries in Asia for manufacturing in place of China, said Pareekh Jain, chief analyst at Pareekh Consulting. “India has a good chance to become an important manufacturing hub for Cisco and this could be one more hi-tech success story of manufacturing in India, similar to Samsung.”
“India is already becoming a hub for mobile phone manufacturing and the success of Cisco manufacturing could help in making India a hub for telecom equipment manufacturing,” he said.
According to IDC’s Srinivasamurthy, India is becoming a strong alternative to countries like China in the manufacturing space. He thinks that since Cisco also wants to focus on exports from this facility, it will position India as a destination to invest in the hi-tech manufacturing space.