Cisco considers manufacturing products in India

It's planning to invest $1.1B in India over the next three years

Cisco Systems Inc. is considering having its products manufactured in India following a request from Dayanidhi Maran, India's minister for information technology and communications, Cisco President and CEO John Chambers told reporters in Bangalore today.

In line with Cisco's strategy, the company will not invest in a facility, but contract with other companies.

"We have influence on where our suppliers' plants are located," said Chambers, who added that he would be back in India next year to offer an update on the company's manufacturing plans.

Cisco got some of its suppliers to locate their facilities in China after the Chinese government asked Cisco to manufacture locally, Chambers said.

A number of telecommunications and networking equipment vendors have already announced plans to set up manufacturing facilities in India. The government announced earlier this month that two large government-owned telecommunications services companies, Bharat Sanchar Nigam Ltd. and Mahanagar Telephone Nigam Ltd. in Delhi, would make local manufacturing mandatory for its equipment suppliers.

Cisco, based in San Jose, will invest $1.1 billion in India over the next three years, including $750 million in expanding its research and development operations in India, Chambers announced this week in Delhi. The company also announced a $10 million investment to support the Indian government's e-governance programs.

Cisco today announced an additional $50 million investment to set up a 1-million-square-foot campus in Bangalore to house the company's R&D, IT, sales and customer support staff. The campus, which will have 3,000 staffers in the first phase, will be operational by June 2007, the company said.

Cisco's large investments in India are designed to take advantage of India's large pool of low-cost talent, which Chambers said is about one-fifth of the cost in the U.S. The company is also investing in India in anticipation of growth in the Indian market. India is the next big transition market after China, said Chambers, adding that in three to four years, the Indian market could potentially be larger than the Chinese market.

As part of its $1.1 billion investment, Cisco is investing $100 million in start-up companies. The company has already invested $40 million so far in 10 start-ups in India, said Chambers, adding that down the line, some of these companies could be acquired and become part of Cisco. The company will invest in firms that are considered good financial investments, as well as those that have good technology for the global market, he said.

Even as Cisco is adding staff in India to make it the largest development location outside the U.S., it continues to add development staff in the U.S. as well, Chambers said.

Copyright © 2005 IDG Communications, Inc.

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