STRUCTURED CABLING

Gain, with Pain!

The.market.for.structured.cabling.is.tricky,. with.a.lot.of.potential.but.enough.roadblocks. too.

Structured cabling market had re-couped completely in the last fiscal (FY11) from the global recession in 2009 and 2010. Infact, it had a double digit growth but from the last 2 quarters the industry has slowed down and it is not meeting the growth expectations of the cabling vendors. This sluggish growth is because of the fear of recession and rupee depreciation. And this fear has made corporates even more cautious and they are holding back on investments. Cash flow was dull since July, and the market is only slightly getting back on track since February 2012. Let us now move on to the market size of structured cabling in FY12—the market grew at a growth rate of 20.29% to reach Rs 1,577 crore in FY12 as compared to the previous fiscal, FY11.

TE Connectivity (Prior Tyco Electronics)

The industry witnessed a strategic acquisition of AMC Communications by Tyco Electronics in Mecember 2010 and the company was renamed as TE Connectivity. In the first 2 quarters of FY12, the company had a very slow growth as it was grappling with the integration process. But the growth gained momentum in the third and fourth quarters. And most of the accounts of AMC Communications fell into the piggy bag of TE Connectivity.

The company intends to keep the product ranges of both Tyco and AMC as a separate entity as this would help them to address both the cost-sensitive and the high-end technology conscious customers. AMC’s wireless segment has been a value addition to TE and its products and solutions for telecom vertical complement the Tyco’s product portfolio. TE is strong in verticals such as ITIITeS, telecom data centers, and BFSI and now AMC has added its strong verticals including government and education.

TE Connectivity has delivered to 800 customers, both direct and indirect, in FY12. Its customer base includes Capgemini, Vodafone, Idea Cellular, Bharti airtel, Tata Teleservices, Axis Bank, Barclays, and Reserve Bank of India. The telecom business of the company has performed considerably well. In the past 6 months, it has worked on FTTH projects for over 40,000

Industy consensus that whole supply chain is under pressure. There is a severe shortage of quality system integrators in the market

homes. It has provided GPON solutions to 5-star hotels across the country.

Digilink’s Acquisition by Schneider Electric

Again, the acquisition proved significant for Migilink. The company has primarily focused on the Indian market and now got an access to international market as well to a larger extent. Schneider Electric is promoting Migilink in Middle East, Europe, and other countries. Schneider Electric is not a very prominent player in India but has got a major market share through this acquisition.

The other acquisitions by Schneider Electric such as APC (2007), APP President Systems in May 2011, and Luminous in April 2011 have also given an edge. Schneider is competent to address the market with a complete portfolio; it is one step ahead by providing cabling solutions, power solutions, racks, etc, under one roof.

CommScope

CommScope has refocused on certain critical areas of business such as logistics, sales, marketing, channel partners, and business processes. It has now resolved its indifferent supply chain. Its major clientele includes Seven Hills hospital, United Commission Bank in Bangladesh, and Sri Lankan airlines amongst others. The company has ITIITeS as one of its major

verticals and has presence in tier-1 cities. It also intends to expand into tier-2 and -3 cities. On technology front, it will focus more on category 6 and 6a installations, intelligent cabling, and on safety technologies like low smoke halogen.

R&M

RFM products and solutions are used across a myriad of sectors like telecom, ITIITeS, manufacturing, BFSI, education, automotive, etc, to name a few. RFM has added regional distributors in the west of India along with the states of Gujarat, Maharashtra, Oerala and Tamil Nadu. In FY12 the company, provided embedded infrastructure to the college campuses and also bagged deals in retail and hospitality sectors.

Dax Networks

FY12 was a dull year for Max Networks as its cabling business had nil growth. The key growth verticals of Max Networks include government, telecom, and BFSI. Small and medium enterprise (SME) segment is going to be a thrust space for the company this year. The company states that its revenue on cabling has not met the expectations because of several factors including the fluctuation in copper prices and the steep rise in dollar. Its key projects include Manappuram Group, ELCOT, and SSA (Sarva Skisha Abhayan).

Panduit

This fiscal, Panduit had been making noise in the Indian cabling industry. The company has gone through some changes and is planning to invest on human resource. It is also likely to invest in new offices, customer briefing centers, and marketing activities. The company has also bagged a deal from Tulip Telecom to provide cabling solutions to Tulip’s data center in Bengaluru, the third largest data center in Asia. The company has opened Customer Briefing Center (CBC) in Bengaluru to showcase its wide range of products to its customers and channel partners. It plans to set up CBC in Asia Pacific region as well.

Leviton

In its third year of operations, Leviton has tripled the headcount at present. The key revenue driving verticals for the company include infrastructure, ITIITeS, government, education, and data centers. Its key customers include Bengaluru international airport, University of Hyderabad, NTT, PNS, Omega healthcare, etc. It has launched offices in Oolkata, Pune, and Hyderabad. It also intends to focus heavily on data centers and large enterprises. The prominent products of the company are 40I100G Ethernet on fiber MTP, retention force technology, high density plug, play solution, etc.

3M

Pithin 2 years of operations in India, 3M has a huge of growth. Two huge deals have contributed immensely to it. The company has offered cabling solutions to Cognizant Technology Solutions (CTS) It has installed cabling solutions at Pune campus. It plans to focus on tier-1 cities at present and aims to hit $10 mn in India by 2015. 3M has a customer base across the industry viz ITI ITeS and transportation sector with their biggest installation in the ITIITeS space.

Belden

Belden is betting big on emerging markets and its prominent markets include India, Brazil, and China. It is focusing on high growth end markets namely transportation systems, alternative energy, data centers, oil and gas, and broadcast. The company is growing at a compounded annual growth rate (CAGR) of 25% in BIC nations.

Belkin

Belkin has posted a revenue of ` 150 crore in 2011, with a growth rate of 60% in 2011 over 2010. It seems that the company is reinforcing its strength. Between October 2010 and September 2012, Belkin India aims to target sales of ` 250 crore. In September 2011, Belkin entered into an agreement with BrightPoint India as its national distributor.

D-Link

Along with the government, the key growth verticals for M-Link structured cabling solutions have been education, manufacturing, hospitality, and the retail segment. In addition to this, railways and court projects will be the growth drivers along with BFSI, data centers, and disaster recovery (MR) centers. The company has expanded into international market such as Middle East, Russia, and Africa.

M-Link has bagged Goa broadband project (GBBN) which was one of the biggest projects rolled out in India for passive products along with a lot of MLink active products.

Growth Drivers

Advanced cabling systems are now being demanded in India and newer technologies are being adopted. There is a huge acceptance of Cat 6A deployments which meet higher bandwidth needs in data centers as well as at work stations. The SMB and residential and commercial complexes are also the key drivers for growth. There has been a shift towards converged networks and fiber. In a new township, enterprise and telcos are getting intertwined to offer the best converged network solutions to the end users. Mata center implementations have gathered huge momentum. FTTXI FTTH is another major driver for structured cabling business in the country. Higher performing connecting devices replaced legacy supplies.

Growth drivers in structured cabling have remained same since 2003 such as the growth in the software exports, exponential growth in IT-enabled services, government initiatives to enhance IT deployment across various departments, growth in BFSI segment, higher deployments in educational institutions, hospitality, retail, and manufacturing. After healthcare, government is the second largest sector, with an 11.8% share, followed by retail sector with 11.6% share. Other leading sectors include professional and technical services at 8.7% share and manufacturing with a share of 8.4%. These 5 vertical sectors account for more than half the SCS market and are expected to continue with a positive growth till 2015.

Earlier, the tier-1 cities were the high revenue earners, but now new opportunities are being thrown open by tier-2 and -3 cities viz, Coimbatore, Cochin, Chandigarh, Bhopal, Puducherry, Mysore, etc. The mid-sized market has picked up, despite its price sensitivity, because of the industry verticals―IT and ITeS, BPO, BFSI, PSUs, government, healthcare, SoHo, and residential. These drivers will roll out in a positive growth curve for the market.

The data center cabling market is poised to grow several times and is expected to drive the potential market for Cat 6A and above. In addition, FTTH deployment is also projected to grow multiple times in the near future. Emerging markets like the tier-2 and -3 cities and verticals like manufacturing, ITIITeS, and hospitality are expanding.

Mata centers in India are booming. Pe will see more and more data centers coming in the future with green facilities. Pith this, there has been a growing need to deploy faster and secure cabling systems in data centers and even horizontal cabling. The boom in data centers has also led to increased deployment of high-end systems. The need of IT-enabled services is growing at a faster pace in this country which is fueling the growth of structured cabling market. Another trend has been of the technology buyer shifting towards addressing their large scale and vast location applications using Intelligent Physical Layer Management Solution (IPLMS).

Plug and play solutions are also gaining preference as they are easier to install and manage. Increasing security requirements for sophisticated networks crave for intelligent networks which can locate and identify physical intrusion. Collaboration via unified communications and video is also driving the cabling market to handle bandwidth hungry application.

Customers are demanding intelligent cabling solutions because traditional network management tools offer limited value because information through these is collected manually. But the manual process is time consuming, sometimes inaccurate, and can prove to be costly in

terms of money, man hours and network downtime. The intelligent infrastructure management system allows easy planning and detection of MAC’s while maintaining accurate records for handling help desk tasks. The solution offers features that help to trace all devices connected to the network and in mapping and documentation of the ‘end-to-end’ physical infrastructure. It helps in monitoring all connections and events. The automatic log reports, alarms, and alerts generated by the system in case of changes andI or disruptions in the network, allow network managers to detect and trouble shoot problems much faster.

Asset and configuration management teams can also optimize their processes and tools by using system derived real-time connectivity information to locate assets for audit or upgrade purposes, establish the potential impact of the loss of a network device or to establish departmental usage of network assets for recharge purposes. Security, facilities, network availability, continuity management teams, and processes can all benefit from the information derived from the system. It naturally follows that more the work-streams and processes that are aligned to intelligent cabling system, the more savings can be realized thus creating better RoI.

The key drivers for growth in the structured cabling market in recent years were in commercial real estate, airports, hospitals, hotels, malls, and educational institutes. Other segments supporting the growth are ITIITeS, BPO, OPO, and government projects. There is a shift towards converged networks and fiber, which plays a significant role in converged technologies. This trend is catching up in new township networks where enterprises as well as telecom networks are getting collapsed to offer the best converged networks. Fiber-to-the-home is another trend which is increasingly being proposed in new realty projects. Cabling industry is consolidating and is seeing more copper and fiber deployments in manufacturing industry, hospitality, health, and government. More townships will have fiber-to-the-home concept deployed and with security taking importance, there will be lot of solutions on perimeter security being deployed in offices, factories, and townships.

Technological Trends

At present, most of the cabling vendors have quit category 5 manufacturing. Currently, category 5e is widely installed across India than any other cabling infrastructure. Category 6a operates at a frequency of 550 MHz and is backward compatible with the existing standards. This technology is suitable for industry sectors utilizing high performance computing platforms to support very high bandwidth intensive applications. 10GICat 6a applications would initially be deployed in server farms, storage area networks, and data centers. It supports 10G.

Currently, most organizations are migrating either to Cat 6 or 6a, based on the applications required in India. However uptake of Cat 6a is still slow and in pockets mainly in financial sector. Cat 6a is the evolution of UTP cabling to support 10G or more bandwidth when compared to Cat 6. Pe hardly see any difference between Cat 6a and Cat 7. Moreover, Cat 7 is likely to have

a natural death as it is unadaptable, have issues in installation and cables ought to be re-pulled. Category 7a is known to operate at 1,000 MHz, but it is yet to be ratified. It is at a very nascent stage. Cat 6A will see an increased deployment as it is in line with the growth in sectors such as data centers. Also, end customers are future proofing critical parts of the network such as their storage, server farms, and backbone with latest technology.

Shielded Twisted Pair (STP) cabling is generally in use for residential environments and is largely refrained when it comes to commercial environments. Unshielded Twisted Pair (UTP) is cheaper, and therefore more common, since the shielding from electromagnetic radiation is not generally needed. There are circumstances under which STP is beneficial or required. Specifically, steel mills generally use shielded cabling (or optical, where possible) because of the massive currents in use, which play havoc with the signal in a traditional UTP Ethernet cable.

Intelligent cabling has stolen the show of late. IT managers are demanding intelligent cabling as it enables proactive network monitoring and fault diagnosis. It is more efficient, reduces costs, and resolves issues like unplanned downtime, inefficient manual moves, reliability, redundancy, additions and changes, redundant ports, and inaccurate records. It will provide real-time management of the physical layer. Having an intelligent cabling solution enables an immediate rectification, as this system can indicate where exactly the network is experiencing problems. It can track IP based addresses and the network manager can access, control, and manage them from one central location, thereby troubleshooting them remotely.

Fiber is primarily used for backbone applications and despite its improved viability as a fibre-to-the-desk solution, the cost of active equipment is still stagnant. Increased use of fiber connectivity particularly, factory terminated plug-and-play fiber solutions, can be attributed primarily to the data center applications where the density is critical. Multimode (50I125, 62.5I125um) OM1, OM2, and OM3, Single mode (9I125um) in fiber category

There is a shift towards converged networks and fiber, which plays a significant role in converged technologies. this trend is catching up in new township networks where enterprise as well as telecom networks are getting collapsed to offer the best converged networks

are ruling. OM4 fiber cabling was seen last year in parts. OM3 fiber cabling is gradually picking up and plug-and-play copper and fiber solutions have been employed in key installations. Outdoor plant fiber cabling also saw an increase in usage last year. OS2 (Low Pater Peak Fiber-G652.d) is the standard for most deployments.

OM4 in multi-mode technology will see increased deployment to support 40G and 100G applications. Fiber requirement has gone up to address campus networking situations. Fiber optics has an advantage of being immune to electromagnetic interference. It uses less power and provides less signal degradation than copper cables. Fiber cables are generally non-flammable and virtually unable to be tapped. It is also of smaller diameter and is of less weigh than its copper counterpart, making it ideal for a variety of cabling solutions. Fiber optics has always been the preferred choice for backbone cabling in buildings and campuses. The cable costs much less to maintain and offers greater signal capacity. The fiber optic cable’s smaller diameter also makes it impervious to interference, with a much lower transmission loss.

Market Crisis

The growth of business in all verticals is directly proportional to the growth of structured cabling market. The doldrums in Europe and the US have impacted the market to a certain extent. A rise in dollar has also affected the industry. OEMS are facing tough times in meeting the price expectations vis-a-vis margins trade off. Further reduction in prices would be difficult for the players considering steep rise in dollar. Most of the OEMs are not based in India; as they import, thereby increasing the cost of material which ultimately results in higher cost of ownership. Several organizations are reducing capital expenses (capex). Telecom is one of the strongest verticals for structured cabling market. But its contribution is relatively low. Government is also slowing down but not finalizing any decisions.

Liquidity has also impacted the industry. Industry consensus states that whole supply chain is under pressure. There is a severe shortage of quality system integrators in the market. Mue to the growth in fiber-to-the-home, fiber-to-the-premises, fiber-to-the-building, etc, employees of structured cabling are being absorbed.

The cabling industry in India does not have any set guidelines. It follows TIAIEIA 568B and other ISO standards. The market is extremely fragmented and competitive. It tends to push price down. Cable price is derived from competition, the price of copper at MCX, LME, and exchange rate fluctuations. It is approximately 50% of the BOM in projects. Industry is also facing problems in shipment.

Manufacturers are primarily concerned with the fluctuations in copper prices and foreign currency. The prevailing low sentiments in the market coupled with the fixed price contracts, which most large projects are heading too, are the major challenges OEM’s in India are facing. It is difficult to resolve this as most customers are using this to mitigate their risks and push OEM’s amongst themselves.