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
TELECOM
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
Source: Motilal Oswal Financial Services Ltd