HPE to start manufacturing servers in India under PLI 2.0 scheme

Cloud computing and storage solutions company Hewlett Packard Enterprise (HPE) will start manufacturing high-end servers in India in partnership with VVDN Technologies.

The company aims to make around $1 billion worth of products from VVDN’s plant in Manesar, Haryana, in the next five years.

HPE is likely to be one of the earliest players to start manufacturing in the country under the recently-revised production-linked incentive (PLI 2.0) scheme for IT hardware.

The new manufacturing operations will support the growing demand from customers in India and diversify HPE’s global supply chain, the company said on Tuesday.

According to IDC’s latest Worldwide Quarterly Server Tracker, India’s server market witnessed a significant growth of 52.9 per cent year-on-year (YoY) by vendor revenue. It stood at $2.3 billion in the calendar year 2022.

India’s server market is expected to grow at 7.5 per cent compound annual growth rate (CAGR) for the 2022–2027 period.

“The recently-announced PLI Scheme 2.0 aims to make India a global hub for electronics system design and manufacturing (ESDM). We believe large-scale IT hardware manufacturing will help in broadening and deepening the manufacturing ecosystem. We welcome HPE’s decision to start their manufacturing line in India, as it will enhance domestic production capacities,” said Ashwini Vaishnaw, Union minister for communications and electronics and information technology.

HPE has its second-largest workforce in India after the United States. The company, so far, focused only on research and development (R&D) activities in India. It has its largest R&D campus in the world at Mahadevapura in Bengaluru, which serves its global product development. The company’s India headcount stands at more than 4,000 and includes scientists, engineers, and research teams.

“India is a strategic market for HPE’s business, talent, innovation – and now, manufacturing. Customers in India continue to turn to HPE to help them digitally transform, and our 14,000 team members here play a key role in driving our edge-to-cloud strategy. We are proud to build on our strong presence by establishing a manufacturing operation in this important country,” said Antonio Neri, president and CEO, of HPE.

He added: “Today's announcement marks a significant milestone for HPE and reiterates our commitment to the Government of India’s ‘Make in India’ initiative for a self-reliant India.”

The new facility will make high-volume servers to support business critical and general-purpose workloads, serving customers across government, enterprise and small and medium businesses (SMB). The memorandum of understanding (MoU) was signed within 10 days of the India-US joint statement on co-production and development of technologies.

IT hardware PLI 2.0 – the scheme offers incentives of up to nine per cent on the incremental sales of laptops, tablets, all-in-one PCs, servers and edge computing devices manufactured in the country to attract investments in the sector.

“To promote domestic manufacturing and boost the economy, the Indian government would give preference to 'Make in India' server vendors for their procurement which is helping some of the local manufacturers. The intent is to be self-sufficient and build capabilities to address the local demand and eventually become a global hub for server manufacturing, hence Indian government announced the PLI scheme for IT hardware to support local manufacturers and attract global investments to drive the Indian economy," Dileep Nadimpalli, Dileep Nadimpalli, Senior research manager for Enterprise Infrastructure at IDC India.

The move from HPE is significant in the light of several US-based tech majors looking to diversify their supply chain due to over-dependence on China, especially in tech manufacturing.

Last month, global tech player Cisco too announced setting up of its manufacturing plant in India. This move is part of Cisco's strategy to create an even more diverse and resilient global supply chain. With this latest investment, Cisco will cater to the growing demand from customers in India and aims to drive more than $1 billion in combined domestic production and exports in the coming years, said the company.