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Phone giants race to set up shop in India

India, the world's fastest growing wireless market, is also becoming a handset manufacturing hub as global phone makers seek cost-cutting opportunities in a country where phone ownership has room to boom.

Despite a lack of reliable infrastructure in India such as regular power supplies and world-class ports, companies such as Elcoteq, Europe's top electronics contract manufacturer, have set up shop to soak up local demand and base their global sourcing from Asia's third largest economy.

Manufacturing in India could save costs by 2-3 percent - an attractive edge for handset makers whose margins are being eroded by competition and advertising costs.

Nokia, a leader in India's US$2.5 billion mobile phone market, and its suppliers have announced plans to invest up to US$150 million in a manufacturing plant to keep costs low amid rising competition.

Handset makers are encouraged by policy changes in India that allow unlimited competition in services and the opening of the telecom sector to foreign competition.

Over the past two years, mobile sales have boomed in India as local call rates of about 1-2 US cents a minute - the cheapest anywhere - attract about 2.5 million new users a month. Indian mobile subscribers overtook fixed-line customers last year.

With more than 60 million users, India's mobile base exceeds the population of Italy.

Apart from strong local demand, India's software servicing skills and a low-cost but talented engineering workforce are potent attractions.

Already, more than 15 firms offer Indian consumers a bewildering array of phones priced from as low as US$46. But analysts say firms will need to bring prices down to about US$30 to make inroads into rural areas, where more than 60 percent of the population lives.

Although Indian firms such as Spicenet are assembling phones, the sector is likely to remain in the grip of global makers due to high investment costs and a phone's short shelf life.

 

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