Chennai lowest-cost FDI location for electronics R&D

T.E. Raja Simhan | Updated on: Apr 06, 2022

Chinese Celkon officials (R) watch as Indian techinicians check mobile phones at the Celkon Manufacturing plant at Medchal Mandal in the Rangareddy district on the outskirts of Hyderabad on June 26, 2015. Celkon has opened its first plant in India manufacturing feature phones and smartphones. AFP PHOTO/NOAH SEELAM | Photo Credit: NOAH SEELAM

Penang takes the second spot followed by Gurgaon, Pune

Chennai has been ranked the world's cheapest FDI location for electronics R&D with estimated annual operating costs of $1.24 million for a 50-person centre. Penang ($1.32 million) took the second spot followed by Gurgaon ($1.52 million) and Pune ($1.53 million), says fDi Benchmark, an investment location comparison tool from the Financial Times.

In terms competitiveness, Chennai was ranked second – next to Seoul – as the world’s most competitive location for electronics R&D activities. The two Chinese mega cities of Guangzhou and Shenzhen were in third and fourth places, respectively, the report said.

Boost to TN govt

The study should give a major boost to the Tamil Nadu government which is trying hard to woo more investors in the electronics sector to Chennai. The multi-sector SEZ, Oragadam and multi-sector SEZ, Sriperumbudur are two sector- specific SEZs for electronic hardware. Companies such as Samsung and Apple have a strong presence in manufacturing, the presence of large R&D centre is missing, said sources.

Location competitiveness was benchmarked based on cost and quality of doing electronic R&D activities.

The State produces nearly 20 per cent of India’s electronics. The State’s Electronics Hardware Manufacturing Policy 2020 has targeted to up the electronics industry output to $100 billion and raise export contribution to 25 per cent.

R&D policy soon

The State government soon plans to announce an R&D policy with focus on using the State’s human resources effectively, Industries Secretary S Krishnan recently said at a CII seminar.

Guidance Tamil Nadu in its website points out that the State provides a conducive environment for large companies with accessibility for the heavy supply chain and availability of several thousands of employees.

The South Korean government has invested in IT infrastructure for decades and rolled out R&D tax incentives to multinationals and chaebol (domestic family-run conglomerates). This has enabled the likes of Samsung and LG to become world leaders in memory chips, displays and smartphones.

Pooja Kulkarni, MD & CEO, Guidance Tamil Nadu, reacting to the report said that presence of the best institutions in higher education coupled with the best ecosystem for electronics manufacturing has made this possible.

The electronics manufacturing ecosystem is mature with the presence of global majors and cutting across all electronics domains. It's not for no reason that companies like Ford and Saint Gobain, have their global R&D centres here. The cost of living in Chennai is lower than other places, she added.

Companies, including Flex, Sanmina, Salcomp and Foxconn have strong inhouse R&D units. Some of the manufacturers are engaging with the IIT Research Park (IIRMRP) too, said sources.

“We know this. IITMRP has played its role,” said its president Ashok Jhunjhunwala

Published on April 06, 2022
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