Mobile Manufacturing

8/3/2019 Mobile Manufacturing

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Nokia Manufacturing Plant- Sriperumbudur, Chennai As the global leader in mobile communications, Nokia is committed towards developingits manufacturing infrastructure and establishing a global sourcing network. The NokiaIndia manufacturing facility located in Sriperumbudur, Chennai is Nokia's tenth mobiledevice production facility globally and has been created in line with Nokia's global

philosophy of developing world class manufacturing systems that enable best-in-classquality, lowest cost, world class responsiveness, just in time delivery and a challengingand joyful work environment.

Factory Highlights y The factory construction from ground breaking to manufacturing of the first product took

5 monthsy Started with 550 people in January 2006, and grown to 8000 people

Spread over an area of 210.87 acres, Nokia started its operations with 550 employeesin January 2006 and today boasts of 8000 employees, 70 percent of whom are women.Currently the factory exports to 50+ countries in South East Asia, Middle East,Africa, Australia and New Zealand, other than catering to the demands of the

domestic market. Nokia's manufacturing facility in India reiterates its commitment to thefast growing Indian telecommunications market.The Chennai facility has been built keeping in mind Nokia's commitment to employeesafety and in compliance with environmental standards. The quality management andsafety systems at the Nokia manufacturing facility in Chennai are world class.

Nokia lays special emphasis on the well being of its employees and the Chennaimanufacturing site has a highly motivating work environment that is designed to sustaina large & diverse talent pool. Nokia's employee practices are committed to ethicalconduct, full compliance to applicable national and international laws and respect for human rights in the spirit of internationally recognized international labour standards in

the ILO conventions, the United Nations' Universal Declaration of Human Rights and theConvention on Rights of the Child.

Nokia Telecom Park Chennai was selected as the location for the Nokia Telecom Industry Park due to theavailability of skilled labor, support from the state government and the presence of goodlogistics connections. The mission of the Nokia Telecom Industry Park is to create anetwork of co-located and co-dependent partners that operate at world class standardsand manufacture high quality products.

Developing the Nokia Telecom Industry Park in Chennai into a world class high-techindustrial zone is an important part of Nokia's global manufacturing and R&D network

strategy. The Telecom Industry Park not only underlines Nokia's successful cooperationwith the Indian government but also represents a unique and optimized business modelthat will provide growth opportunities for all parties in the value chain. The 210.87 acresof land in the Telecom Industry Park provides Nokia with the benefits of a pollution freeenvironment, in-house customs clearance, and uninterrupted power supply.

With Nokia as the key enabler, the Telecom Park is expected to attract about 8 globaland domestic component suppliers and service providers and create more than 30,000

jobs when it is in full operation. This Nokia Telecom Park will ensure that the Nokia



India Chennai factory has a consistent supply of lowest total cost material and servicesfrom reliable, collaborative sources of global and local suppliers.Nokia Telecom Industry Park Construction update and facts

y Size - 210.87 acresy External fencing around Nokia Telecom Industry Park - 5.7 km in lengthy Area of main building: 30,748 m2y Total amount of structural steel used in factory construction 2500 ty Total Capacity of under ground water sump at factory 450 m3y Project Safety target achieved - One Million man hours without Lost Time Injury

The Nokia Telecom Park also has made significant progress with 7 suppliers alreadysigned up. These include Salcomp, Aspocomp, Foxconn, Perlos, Jabil, Laird andWintek. Of these, 2 suppliers have already started shipping to Nokia Chennai viz.,Salcomp and Perlos. The Park will strengthen Nokia's delivery capabilities with addedefficiencies and flexibility.Nokia has been the engine of the investment train in Chennai's manufacturing

corridor. Many electronics manufacturing companies have announced plans to come tothe city since Nokia's establishment. The total impact of the Nokia SEZ can bemeasured only by an assessment of the actual potential realized ± encompassingconstruction, direct employment and services opportunities that are sure to come inresponse to the rising headcounts.Since the launch, the Nokia facility and the Telecom Park have not only met the targetsset at the beginning, but created an extremely bullish atmosphere in the Sriperumbudur manufacturing corridor. Nokia will continue to play a key and leading role in thedevelopment of this region.

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Samsung¶s state of the art, highly automated manufacturing facilities are located at theCompany¶s sprawling Complex at Noida and its recently inaugurated Sriperumbudur facility,near Chennai. Samsung India¶s Noida CTV Plant enjoys the Number 1 position amongst all



Samsung subsidiaries in terms of its Colour television productivity and has been ranked as thesubsidiary with the µBest Quality System¶.

The manufacturing capacities of Samsung products manufactured at the Noida Facilityare as follows:

PRODUCT DETAILS

CTV Flat TVs & LCD TVs

Colour Monitor CRT & TFT LCD Monitor

Refrigerator Frost-free and Conventional Refrigerators

Washing Machine Fully Automatic and Semi Automatic

Mobile phones GSM Handsets

The highly advanced Chennai Facility that has been inaugurated in November 2007 will help theCompany respond better and faster to the growing demand for its products in the Southern partof the country. The Samsung manufacturing facility at Sriperumbudur is the Company's secondmanufacturing complex in the country. Samsung India is working with and contributing to the development of the domestic componentindustry in the country. The Company is working with its partners to improve their productquality and processes. Thus, Samsung vendors are sent to different Samsung subsidiaries tomeet the Samsung overseas vendors in order to benchmark their own processes. Samsung isalso training its vendors on eco-partnership so that the components manufactured by them areµeco friendly¶ as per ROHS norms.

Samsung products manufactured in India currently enjoy an average localisation level of over 50%.

Micromax challenges Samsung, LG in mobile phonestakes

Mumbai: Indian mobile handset maker Micromax Informatics Ltd is challenging Samsung India

Electronics Pvt. Ltd and LG Electronics India Pvt. Ltd as one of the top three sellers of cellular phones in the country, overtaking rivals such as Motorola Inc. and Sony Ericsson Mobile

Communications AB and prompting it to look overseas to expand sales.

The Gurgaon-based firm, which entered the business about two years ago, sold about 1 millionhandsets in January, up from 700,000 in December.



The surge would have vaulted the company up the rankings, said Vikas Jain, one of the four founders of the relatively little-known Micromax.

Market research firm IDC¶s ³numbers for the December quarter or January are not available yet, butaccording to our sales numbers it¶s safe to assume that we are at the third spot´, said Jain, who setup the company in 1990s along with three friends from engineering college²Rahul Sharma, Rajesh

Agarwal and Sumeet Kumar, all of whom are in their mid-30s to early 40s.

Game changer: A mobile phone shop in Faridabad. After capturing the rural market, Micromax is nowfocusing on the urban pie.

Citigroup Global Markets Inc. confirmed Jain¶sassertion in a 3 February report, in which analystsRahul Singh and Gaurav Malhotra said Micromaxhad a 10% market share, putting it at No. 3 behindNokia Oyj and Samsung, which had 12-13%. Theanalysts were prompted to write about the unlistedfirm after being surprised by the brand¶s presenceacross rural markets, they said.

The success of Micromax prompted US private equity group TA Associates to buy ³less than 20%´of the firm for around $45 million (Rs210 crore today) in December, valuing it above $225 million andindicating confidence in its growth potential. Jain estimated that the firm will close the fiscal with

sales at around Rs1,500 crore.

Of the 100 million handsets sold in the year to June 2009, according to the latest IDC data, Nokiawas the market leader with a share of about 56%. Samsung and LG were at second and third

respectively, with 7.7% and 5.4%.

India¶s mobile phone market has been dominated by overseas brands such as Nokia and the twoSouth Korean firms, making Micromax one of the first home-grown ventures to make a dent in thehandset market as well as the wider consumer electronics sector.

Micromax wants to move up a spot in the two months left in the fiscal. ³The No. 2 spot has alwaysbeen a slippery one in India,´ Jain said. ³We have seen Sony Ericsson, Motorola, and nowSamsung, which is under threat.´

The entry of new players is serving to fuel growth in the market, according to Samsung, which willdepend on core strengths to defend its position.

³As far as Samsung is concerned, we are relying on product innovation, superior product qualitybacked by the reassurance of Samsung service and an enhanced channel penetration to drive our growth,´ Ranjit Yadav, director (mobile and IT) at Samsung India, said in an emailed note.

LG¶s spokesman was not available for comment.



Micromax, started operations in 1991 as an embedded software design firm, but was incorporatedas a company in 1998, when it branched out as a distributor of computer peripherals such asprinters, monitors, scanners from manufacturers such as LG, Sony Inc., Dell Corp.

³We hope to be present in at least one country each in Latin America, Middle East and Africa beforethe end of the financial year,´ Jain said. The firm has identified Brazil, Nigeria and Dubai as targetmarkets.

Micromax specialized in entry-level and mid-segment handsets priced between Rs1,800 andRs2,400 when it started selling the devices in 2008, confining itself to small towns and rural areas inthe first 12-18 months. Encouraged by its success, the firm expanded to larger cities and now has adistribution network of 55,000 retailers, which it plans to scale up to 70,000 by the end of March aspart of its strategy to raise sales to 1.5 million handsets a month.

Micromax is planning to expand its range in keeping with new market demands. It is readyingseveral high-end handsets, including phones that will run on Google¶s Android and Microsoft¶sWindows Mobile operating systems. The handsets are expected to be available in ³April or May´,

Jain said

Having gained traction, Micromax is also working on a strategy to create awareness in the metros,which includes tying up with MTV for co-branded phones.

³Once you have established a good distributor network and sales are robust, the next logical step isbranding exercises to ensure consistent brand re-call among your target consumer base,´ saidRomal Shetty, executive director and head telecom practice at audit and consulting firm KPMG

India.

Micromax has also tied up with a Bollywood celebrity ³who will be announced shortly´ as brandambassador, Jain said. Bollywood star Aamir Khanendorses Samsung phones.

The Micromax phones are designed by the in-house research and development team, as is theembedded software. The on-board chips come from MediaTek Inc., Qualcomm Inc. and InfineonTechnologies AG²the last two also count Nokia as a client. Manufacturing is outsourced to

about 11 factories in Taiwan, South Korea and China.

Micromax has invested Rs100 crore to set up a plant in Baddi in Himachal Pradesh as it feelsoutsourcing manufacturing completely leaves the door open for supply-side uncertainties. Productionwill be scaled up from an initial 50,000 per month.

³If everything goes right, by the third phase in March 2011, the Baddi plant will be making about

500,000 handsets,´ Jain said. If the plant isn¶t able to cope with the numbers, the fallback plan is toacquire a facility in South Korea, Taiwan or China, he added.

Nokia has a plant in Chennai, established in 2006 at a cost of around $150 million, from where italso exports.



Micromax may setup manufacturing unit atSriperumbudur after raising 426 crores

Domestic handset maker Micromax Informatics plans to raise a little over 426 crore from the

capital market with a public issue of 2.15 crore shares. This values the company, which entered

the mobile handset business only three years ago, at close to a $1 billion.

The company said it would use about 50% of the IPO proceeds ( 225 crore) for setting up a

handset manufacturing plant, preferably in Sriperumbudur in Tamil Nadu, while about 125 crore

would be used for marketing and advertising for its brand over the next two years and 75 crore

towards investment in acquisitions and other strategic initiatives.

In its draft red-herring prospectus (DRHP), the company said it might also consider participation

by anchor investors.

Micromax leads a pack of domestic companies, which includes Karbonn Mobiles, Spice Mobiles

, Videocon Industries and Lava International that have made inroads into the 30,000-crore

mobile phone market traditionally dominated by multinationals such as Nokia, Samsung, LG and

Motorola.

Research firm IDC in a report last week said domestic handset makers had capitalised on

Nokia¶s misfortune in India with their share of the market doubling to 33% in the last six months.

Micromax which, according to IDC, is the largest domestic player with 4.1% market share, first

launched phones with a 30-day battery back-up. Its portfolio of 26 handsets includes a phone

that doubles up as a universal remote for television sets and air-conditioners. Twenty-three of

them are dual-SIM. Data compiled by IDC showed that nearly 39% of all handsets sold in the

country between January and June were dual-SIM phones, a segment that Nokia did not have a

single model until recently.

Private equity players Sequoia Capital, Sandstone Capital and Madison India Capital had jointly

bought less than 10% stake from the four promoters of the company ² Rajesh Agarwal, Rahul

Sharma, Sumeet Kumar and Vikas Jain ² for about 200 core in what could be a pre- IPO

placement. These firms have picked up just under 6% as per the DRHP with Sequoia and

Sandstone having 2.68% each and Madison India Capital getting just under 0.4%.



At these valuations, this translates into a 15% gain for these PE players. In December 2009,

another private equity investor, TA Associates, had picked up 15% stake in Micromax for about

200 crore and the current valuations will see it book profit of 3x on its total investment.

JM Financial, Citigroup, Edelweiss and Nomura are the book-running lead managers to the

issue.

For the year ended March 2010, Micromax had sales of 1,600 crore on selling over 70 lakh

handsets, with a net profit of 200 crore, as against revenue and profit of 350 crore and 35 crore

respectively for the previous year. It is looking at a valuation of 13.3 times its previous year¶s

EBITDA.

The handset maker, which has already used the TA funding to expand to neighbouring

countries such as Sri Lanka, Bangladesh and Nepal, is also set to use IPO proceeds to foray

into the global market.

How Micromax sells 1 million handsets every month

Indians buy an average of 12 million mobile phones a month, creating a

market of anywhere between Rs 28,000 crore (Rs 280 billion) and Rs

35,000 crore (Rs 350 billion) per year for those retailing mobile handsets.

The explosive growth is the reason why newcomers keep trying to enter

the market which continues to be dominated by the Nokias and

Samsungs.

Though Micromax sold its first mobile phone just two years ago, it appears confident it can

pull off a coup - it already has a 5 per cent market share. It has roped in actor Akshay

Kumar [ Images ] as a brand ambassador; sports a new tagline of "boring is out" and is

looking at innovative means to grab market share.

One of these, for instance, is a mobile phone that also doubles up as a remote control for

your air-conditioner, TV set or DVD player, perhaps even all three.

There have been innovative co-branding deals with MTV which have helped give the brand

a huge push in the youth market. Phones with Swarovsky crystals on each key have also

been introduced for those looking for low-price chic.

Rahul Sharma, one of the four co-founders of the company and its COO shares his planswith Priyanka Joshi.



Excerpts: How did Micromax get the kind of growth it did, especially in entry-level mobile

devices?

People who want to buy a mobile phone worth Rs 2,000 don't usually ask for brands, theywant value for money. So, instead of trying to get more sales by cutting prices, we sold

handsets that came with a 30-day battery back-up - this was an important advantage in

rural areas where charging a mobile phone was a problem.

We also sold dual-SIM phones that made more sense for Tier-2 or Tier-3 markets where

customers own several SIMs. Of the 26 models that we have in the market right now, 23 are

dual-SIM handsets.

It is this kind of ground-level innovation that has led to Micromax selling about 1 millionhandsets every month. We expect the number to grow further with new handsets that we

plan to launch this year. Isn't the mobile phone space getting over-crowded with over 40 brands of handsets,

and so many of them looking practically the same? Yes, it is a crowded market but Micromax is getting ahead as it won't be putting out a "me-

too" handset for the consumers.

For the premium category which solely comprises of QWERTY keypad handsets, this year's

focus is to ensure the consumer gets simple chat-based tools in the handsets. It is this

category that sees sales of nearly 3 lakh units a month, at an average price of Rs 5,000.

Today, we sell about 80,000 QWERTY handsets a month, and have started working withsocial networking sites, such as Facebook, to ensure better connectivity and continuous

communication on our handsets.

We are also looking at licensing deals with established brands. Last year, Micromax

launched a range of MTV co-branded mobile handsets in the market. This worked well for

us as it instantly created brand recognition for the mobile phones.

The first phone, Micromax MTV X360, was priced at just Rs 5,000, and yet it was equipped

with 3D surround sound from Yamaha & Wolfson and had a sleek steel finish.

How exactly do you carry out research and develop handsets? We have a 40-people team that work on all sorts of crazy ideas that we suggest. The latest

that our R&D team has managed is phones that can also be used as a remote control for

consumer durables in a household, say a TV, an AC or a DVD player. We are also seeing

an increasing preference, among the youth, for mobile devices that provide single-click

access to popular social networking sites like Facebook and Twitter.



We also realised that we need not launch handsets to reach premium customers but we

need to launch premium handsets for the mid-market customers. So, we created Q55, a

clamshell phone which had Swarovski Crystal on the keys and priced at just Rs 5,500. We

made it for women in smaller towns, like Hapur and Belgaum, who would take to the chic

appeal of this handset.

How are you doing things differently as far as handset innovation is concerned?

We have identified tonnes of things that can be done with a handset, and it is up to our R&Dteam to turn those ideas into reality. We have also announced our intentions to enter themarkets in Latin America and Nepal. So, we have set up a manufacturing facility inHimachal Pradesh [ Images ] and extended manufacturing contracts with about 10 factoriesspread across China, Taiwan and South Korea. We are in the process of tying up withlarge-format retail chains to tap the next set of customers. We have every reason to believe Micromax can touch a turnover of Rs 3,000 crore (Rs 30

billion) next year. Since we've seen a distinct growth in sales among the youth, we have roped in Akshay

Kumar who can communicate the innovative features of our phones to the target audience -

these include features such as a memory card which adds more capacity to the handset,

better music, better camera quality and so on.

Needless to say, having Akshay Kumar as a brand ambassador also gives our brand a

trendy look. We will be spending nearly Rs 60 crore (Rs 600 million) in above-the-line

activities that will include print, TV and radio marketing initiatives and Rs 40 crore (Rs 400

million) in below-the-line activities this year.

Since the top four device vendors have turned to app stores to diversify their

portfolio, does Micromax have any plans to add newer capabilities to its portfolio?

We are in the process of bringing in new mobile services that will be based on utility apps

like location-based social networking or GPS-based tracking systems. Although we have

third-party developers who are working to create apps for out handsets, we are doing a lot

of work internally to create mobile phone apps.

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