Huawei plans factory at Chennai to get over Indian security fears

Even as it battles rejection of various deals with telecom operators due to security issues with the Union government, Chinese telecom equipment provider Huawei plans to set up a manufacturing facility in India, near Chennai, at an investment of $300-500 million (Rs 1,340-2,230 crore).

A Chinese delegation is expected to come and meet senior government officials to convey their commitment.

Aiming to continue operations in India, the company wants to steer clear of all the security issues and setting up of a manufacturing unit in India would help in overcoming this, a person close to the development said. Huawei’s executive vice-president Xu Zhijun and President (Asia Pacific) Wang Shengli would visit the country this week to sort out this issue. Huawei has already identified land for the proposed unit near Chennai.

It is also in the process of restructuring its management team and board of directors with Indians. About 85 per cent of the company staff consists of Indians.

The Union communications ministry said there was no blanket ban on the import of telecom equipment and networks from Chinese firms Huawei and ZTE. However, no deals have been approved by the ministry since February 18. It had issued a directive that all telecom operators would have to get equipment tested before placing any orders.

In August 2009, the government banned BSNL from sourcing mobile networks and other related hardware from Chinese vendors in any region that shared international boundaries. The government had also asked all telecom equipment makers to employ only Indian engineers to maintain and manage networks of operators here within a two-year timeframe.

India is the second-largest market outside China for both ZTE and Huawei. ZTE’s sales in India increased by 50 per cent in 2009-10 and contributed over 10 per cent to its $8.8-billion revenues during this period. From just $170 million in annual revenues from India in 2005, Huawei ended 2009 with sales of over $2.3 billion.

All the new players are banking on Chinese equipment providers to roll out their networks, as Chinese equipment come at a much lower price.