Reliance Industries makes debut in electronics manufacturing with US firm
Reliance Industries (RIL) on Thursday entered the electronics manufacturing segment through a tie-up with US-based Sanmina Corporation and will invest Rs 1,670 crore in the latter’s Indian entity to take a 50.1% stake. The joint venture will manufacture high technology electronics hardware like 5G network products, aerospace items, healthcare systems, among others. The partnership will allow Reliance Jio to get home-made radio equipment for its 5G rollout.
Last year, Bharti Enterprises had partnered with Dixon Technologies to make telecom equipment in the country.
Both Sanmina and Dixon were last year selected by the government for the Rs 12,195-crore production-linked incentive (PLI) scheme for telecom gear manufacturing. While Sanmina has reportedly committed to invest Rs 110 crore under the scheme, Dixon has committed an investment of Rs 180 crore.
With the entry of RIL and Bharti into manufacturing, the domestic telecom equipment market would undergo a change with the share of global manufacturers reducing. Chinese vendors like Huawei have already lost out after restrictions were placed on them after the Indo-China border tensions. With players like RIL and Bharti entering this segment, market shares of European vendors like Ericsson and Nokia would also come under pressure.
Although the domestic companies are not expected to meet the demand of 5G gear in the coming year, the development around manufacturing will give bargaining power to telecom firms to strike a better deal with vendors like Ericsson and Nokia, who have also been selected under the telecom PLI scheme. Nokia has committed to invest Rs 125 crore while Jabil, which is a contract manufacturer for Ericsson, has committed to put in Rs 175.60 crore.
Revenues of Sanmina SCI India (SIPL) were approximately Rs1,230 crore (or approximately $165 million) for the fiscal ended March 31, 2021. All the manufacturing as part of the new joint venture will initially take place at Sanmina’s 100-acre campus in Chennai, with the ability for site expansion to support future growth opportunities as well as to potentially expand to new manufacturing sites in India over time based on business needs.