Where dragon’s claws have sunk

India’s border conflict with China has sparked a sentiment focused on drastically reducing dependence on Chinese imports. But that is easier said than done as Indian value chains have deep material links with China, according to a report from financial services firm Motilal Oswal. Here’s a closer look at some key bilateral trade metrics and the sectors vulnerable to such policy changes.

Dependence on network equipment

Telcos are dependent on Huawei and ZTE for network access, which includes front-end telecom sites as well as backhaul network

Huawei’s equipment is used in three of Bharti Airtel’s circles, and 7 of Vodafone India out of a total of 22 circles

Backhaul equipment is far more deeply deployed across India

Globally there are 4-5 major network equipment producers and Huawei is one of the largest, along with Ericsson, Nokia Siemens, Samsung and ZTE

High requirement for telecom equipment

Bharti and VIL incur `100- 200 billion annual capital expenditure over adding access sites and improving backhaul – transport and core capacity

While Bharti and VIL procure equipment from large vendors like Huawei, Ericsson and Nokia Siemens, RJio buys from Samsung

Telcos may find it commercially unviable to switch their network equipment requirement for maintenance and upgrade to a non-Chinese vendor

China is deeply entrenched in the global smartphone supply chain. Any disruption in Chinese products may have a major impact on 4G adoption in India

Need to create local players

Since India has historically sourced network equipment from foreign players, it’s difficult for Indian companies to gain relevance

For an Indian player to become a dominant force, a longer gestation of R&D investment and scale to bring profitability may be required

The New Indian Express

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