Cisco: No plans to manufacture in India

US networks gear-maker Cisco Systems has invested over $1 billion in India, which it calls its second global headquarters and spawning ground for a multitude of technology innovations. But it has no plans to manufacture flagship networking products like routers, switches or telepresence systems in India in the "absence of an enabling" environment. Speaking to ET's Kalyan Parbat, Jeff White, president, India & Saarc, Cisco Systems , gives a sense of the company's global manufacturing strategy and the reasons why India does not yet figure in Cisco's radar as a potential manufacturing hub. 

There are no plans to manufacture in India from a Cisco standpoint. It all comes down to economics when you look at a manufacturing node. There's got to be the right incentive for us to manufacture here, the right cost basis. We're not going to go down a path that forces us to take a profitability hit. Since we are competing on a global scale, Cisco has to look at the cost basis, the incentives , the prevailing ecosystem, and the ability to be able to sustain manufacturing in a way that makes it competitive for the manufacturer.

Decisions on factors that drive cost, the infrastructure within the country, the landed cost, tax incentives, things that contribute positively to a manufacturing decision. That's been the crux of our conversations with the Indian government . Cisco's objective globally is to manufacture only for the right reasons. India must think about creating an ecosystem on a global scale that encourages telecom product manufacturing for export markets without focusing on the local market alone.

I don't have the exact numbers but the dynamics of China versus Malaysia versus India are different. We're always looking on a global basis for an optimal place to be directing our manufacturing, and we do that with our contract manufacturers . For our business model to work, we have to build an ecosystem, and that can only happen if the right incentives are in place.

Cisco's manufacturing requirement is different from a handset maker where there isn't a need to build a deep manufacturing capability around just a handset. If you look at the complexity and embedded intelligence of high-end products and solutions we bring, they require complex manufacturing processes , a large ecosystem involving multiple component suppliers for every product we manufacture. In our case, the ecosystem follows the manufacturer . In other words, if we tell our contract manufacturers that we want to be in Thailand, they follow us into Thailand.

No. Some of our contract manufacturers — like Flextronics — who also work with other companies are already in India. The decision not to manufacture in India is entirely Cisco's .

More spectrum would make life easier. But we believe that the opportunity lies in figuring out how to operate in the Indian environment as it is. Today, we're trying to help telco clients make the transition amid a shift away from traditional voice, with growth coming in from data services along with a shift to IP-based technologies. Telcos want us to solve their problems as there's so much inefficiency in their networks. But these problems can be taken out through powerful technologies like small cells, where you can self-optimise mobile networks by distributing load and enhance customer experience, by way of reduced call drops.