RIL seeks to lead 5G race with Sanmina JV for electronics manufacturing

Investment will help Indian company become a global player in selling 5G technology and telecom gear.

Topics


Reliance Industries | Sanmina | Make in India

Reliance Industries said on Thursday it has signed an agreement to create a joint venture (JV) with Sanmina through an investment in the US-based company’s Indian unit for building an electronics-manufacturing hub in Chennai.

Reliance Strategic Business Ventures Ltd (RSBVL), a subsidiary, will invest Rs 1,670 crore in new shares for a 50.1 per cent stake in the JV and Sanmina, the world’s sixth largest electronics manufacturing services company (EMS), will own the rest.

Reliance’s investment will help its plans to become a global player in selling 5G technology and telecom gear, taking on global players like Ericsson and Nokia. Sanmina has a plant in Chennai and it is among companies eligible for the Indian government’s production linked incentive (PLI) scheme for telecom products and networks (where it will get incentives between 4-6 per cent on the production value).

The JV will ensure that Reliance’s own requirement for telecom electronics and gear as the company lays out an all-India 5G network. Reliance also has a small investment in HFCL, from whom it buys optic fibre and which is also designing and making 5G radios amongst others- and is one of the domestic players eligible under the PLI scheme too.

Reliance will become the second telecom operator to ally with an EMS player, as it look at ways to reduce costs by going for the government’s ‘Make in India’ manufacturing campaign. Bharti Airtel has already done it with home grown Dixon Technologies, setting up a JV to manufacture telecom products with a 85 per cent buy back arrangement with the telecom operator in five years. This JV is eligible under the PLI scheme as well. Airtel has also got into a strategic tie up with the Tatas for 5G technology for both the core and radio. The Tata Group, on the other hand, has bought majority stake in Tejas Network, which is also eligible under the PLI scheme for telecom hardware production.

Reliance’s JV go beyond telecom to newer areas where the company plans to invest. Sanmina is a key player in the green energy space and offers technology solutions, smart meters and electric car chargers. Sanmina also does business in automotive electronics, oil and gas, defence and aerospace, medical equipment and devices and multimedia products amongst others.

The two companies, in a press release, said that they will create “manufacturing technology centre of excellence” that will become an incubation centre for product development and hardware start up eco system.

The JV will also help Sanmina in strengthening its position in the country where its global rivals are already there is a big way. For instance the top three players all from Taiwan which include Hon Hai (Foxconn), Pegatron and Wistron have already tied up big deals with Apple Inc and other global mobile device players like Xiaomi, Realme and Vivo to manufacture in India and some of them mostly for exports. Even US-based Jabil (which has a tie up with Ericcson for manufacturing telecom gear) and Flex are also very active in the country. Sanmina however does not manufacture mobile devices, a key area of growth for the Make in India campaign.

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