Ignore Huawei. Use Western 5G now, build Indian gear for future

With hostility between India and China increasing, the issue of Indian mobile service companies using Chinese equipment for rolling out 5G telecom networks has gained prominence. Traditionally, American and European companies have been dominating the telecom equipment market. However, Chinese company Huawei in the past few years has been threatening the domination of the Western companies in the high-end technology space.

The speed of the internet provided by the 5G network will be up to 100 times faster than the current 4G network and will be used to control machines, objects, devices at homes, hospitals, and factories. It will virtually run everything that we use. The use of Chinese equipment in such important functions made several companies insecure.

After reports have emerged about backdoor surveillance by the Chinese government using its equipment, several countries, including the United States, Australia, and Vietnam have banned the Chinese equipment in their telecom networks. Some countries like Japan, New Zealand among others actively discourage the use of Chinese telecom gear.

India, however, has been indecisive till the hostilities broke out in Ladakh. Following the clash at the Line of Actual Control (LAC), the government has decided to order the staterun BSNL not to use Chinese telecom equipment for 4G. BSNL's 3G network largely runs on Chinese ZTE equipment. If the government decides to discourage private companies from using the Chinese equipment, experts say India has to look towards western products. But the cost could increase for the companies.

"If the situation demands keeping Chinese brands away, the possible solution would be substituting with other international brands like Nokia and Ericsson," Rajan Mathews, director general, Cellular Operators Association of India (COAI).

However, this would increase the total cost incurred on equipment procurement not just because of the absence of competitive Chinese brands but also due to lesser competition in the market. India currently imports $2 billion to $3 billion worth equipment for 4G networks. The initial cost of 5G equipment could be much higher.

"Usually, network providers prefer different vendors for different products. They don't want to be dependent on a single vendor. So they would buy routers from Cisco and chipsets from Qualcomm and likewise mix and match different products from different brands," said Mathews, adding that such practice would increase their bargaining power.

The Telecom Regulatory Authority of India had set a target of bringing down the imports of telecom equipment to zero by 2022. The National Digital Communications Policy 2018 wanted the telecom industry to prefer domestic products. But the Indian industry has not moved much ahead in this direction in the absence of local telecom equipment makers.

Currently, India meets over 80 per cent of its demand for telecom equipment through imports. Of this, Chinese brands account for 30 to 33 per cent. Over the last 10 years, the Chinese companies have been grabbing a larger market share due to lower price and attractive financing options.

Over 30 years ago, Huawei had sought partnership with technologically advanced Indian telecom gear maker Indian Telephone Industries Limited. The Indian PSU rejected the offer, but the Chinese company invested heavily in R&D and innovation ever since and emerged as a challenger to the western domination.

Experts believe that the government could emulate Huawei to build an Indian telecom gear company to make the country self-reliant in such an important technology that virtually runs the country.

"Indian companies can leverage the country's comparative advantage in software production. In most of the products, software accounts for 80 per cent of the cost. However, till now no major push has been witnessed in this direction," said Mathews.

According to Care Ratings, lack of incentives to compensate for relatively higher costs, inadequate monitoring and facilitation for manufacturing telecom equipment and restricted availability of financing options are some of the key challenges of indigenous manufacturers.

Over 30 years ago, Huawei had sought partnership with technologically advanced Indian Telephone Industries Limited. But the PSU rejected the offer