Worldwide spending on cognitive and artificial intelligence (AI) systems will reach US$19.1 billion in 2018, an increase of 54.2% over the amount spent in 2017, according to IDC. With industries investing aggressively in projects that utilize cognitive/AI software capabilities, IDC forecasts cognitive and AI spending will grow to US$52.2 billion in 2021 and achieve a compound annual growth rate (CAGR) of 46.2% over the 2016-2021 forecast period."Interest and awareness of AI is at a fever pitch. Every industry and every organization should be evaluating AI to see how it will affect their business processes and go-to-market efficiencies," said David Schubmehl, research director, Cognitive/Artificial Intelligence Systems at IDC. "IDC has estimated that by 2019, 40% of digital transformation initiatives will use AI services and by 2021, 75% of enterprise applications will use AI. From predictions, recommendations, and advice to automated customer service agents and intelligent process automation, AI is changing the face of how we interact with computer systems."Retail will overtake banking in 2018 to become the industry leader in terms of cognitive/AI spending. Retail firms will invest US$3.4 billion this year on a range of AI use cases, including automated customer service agents, expert shopping advisors and product recommendations, and merchandising for omni channel operations. Much of the US$3.3 billion spent by the banking industry will go toward automated threat intelligence and prevention systems, fraud analysis and investigation, and program advisors and recommendation systems. Discrete manufacturing will be the third largest industry for AI spending with US$2 billion going toward a range of use cases including automated preventative maintenance and quality management investigation and recommendation systems. The fourth largest industry, healthcare providers, will allocate most of its US$1.7 billion investment to diagnosis and treatment systems."Enterprise digital transformation strategies are increasingly including multiple cognitive/artificial intelligence use cases," said Marianne Daquila, research manager, Customer Insights and Analysis at IDC. "Business transformation is occurring across all industries as successful companies embrace the array and potential impact of these solutions. Automated customer service agents, increased public safety, preventative maintenance, reduction of fraud, and improved healthcare diagnosis are just the tip of the iceberg driving spend today. With double-digit on-year spending growth forecast, IDC expects to see an increase in general use cases, as well as a refinement of industry-specific use cases."The cognitive/AI use cases that will see the largest spending totals in 2018 are: automated customer service agents (US$2.4 billion) with significant investments from the retail and telecommunications industries; automated threat intelligence and prevention systems (US$1.5 billion) with the banking, utilities, and telecommunications industries as the leading industries; and sales process recommendation and automation (US$1.45 billion) spending led by the retail and media industries. Three other use cases will be close behind in terms of global spending in 2018: automated preventive maintenance; diagnosis and treatment systems; and fraud analysis and investigation. The use cases that will see the fastest spending growth over the 2016-2021 forecast period are: public safety and emergency response (75.4% CAGR), pharmaceutical research and discovery (70.5% CAGR), and expert shopping advisors and product recommendations (67.3% CAGR).A little more than half of all cognitive/AI spending throughout the forecast will go toward cognitive software. The largest software category is cognitive applications, which includes cognitively-enabled process and industry applications that automatically learn, discover, and make recommendations or predictions. The other software category is cognitive platforms, which facilitate the development of intelligent, advisory, and cognitively enabled applications. Industries will also invest in IT services to help with the development and implementation of their cognitive/AI systems and business services such as consulting and horizontal business process outsourcing related to these systems. The smallest category of technology spending will be the hardware (servers and storage) needed to support the systems.On a geographic basis, the US will deliver more than three quarters of all spending on cognitive/AI systems in 2018, led by the retail and banking industries. Western Europe will be the second largest region in 2018, led by retail, discrete manufacturing and banking. The strongest spending growth over the five-year forecast will be in Japan (73.5% CAGR) and Asia Pacific (excluding Japan and China) (72.9% CAGR). China will also experience strong spending growth throughout the forecast (68.2% CAGR).

Amid speculations on reasons behind the recent speedy regulatory approval of Foxconn Industrial Internet's (FII) initial public offering (IPO) in China, it remains unclear to outsiders what role FII wil play in the Foxconn Group's industrial IoT (IIoT) platform.In a short statement issued earlier, Foxcoon simply indicated that the FII's IPO move is mainly designed to help accelerate its transformation into an IIoT enterprise group driven by big data, AI (artificial intelligence) and robot applications. Nevertheless, what business operations FII will undertake after going public remains quite blurry.Public information shows that FII now directly and indirectly holds stakes in as many as 60 subsidiaries of Foxconn, including Henan Yuzhan Precision Technology, Zengzhou Futaihua Precision Electronics, and ShanXi Yuding Precision Technology, mostly engaged in high-precision metal components and high precision, high molecular polymer components. In addition, it has also incorporated some business operations originally associated with network communications and datacenters. Accordingly, some observers think FII will remain a manufacturing-centric unit of Foxconn.Political maneuver?But if FII is simply a manufacturing entity, it seems unreasonable for China Securities Regulatory Commission (CSRC) to issue a green light to FII's IPO in only 36 days after the application was filed, as traditional manufacturing industries are no longer targeted by China government for further development. Apparently, FII must have zeroed in on industrial and market segments that China is eager to develop with policy support.The quick green light could be interpreted as a political maneuver by China to win over Taiwan businesses, but it remains uncertain whether China would also quickly approve other Taiwan applicants' IPO bids. And of course, the big scale of FII's operations may have been a favorable factor.Anothe likely factor is that FII's direction is in line with China's policies set to steer the nation's industrial development, and China sees FII's IPO as a part of its grand move to tightly integrate IIoT, big data, AI and real economy of the country.But how to keep weaving a profitable business model appealing to investors by leveraging policy advantages will be a pressing task for FII after going public.In realizing the development of IIoT applications in the absence of successful business models for the moment, how the Foxcoon Group will do to integrate its existing internal and external resources or further enhance its businesses through acquisitions will be a big challenge for Foxconn.

Avalue Technology is one of Taiwan's veteran industrial PC (IPC) players, having been in the sector since 2000. Although it is not as big as some of the first-tier players, Avalue still has managed to stay competitive in the market leveraging its advantages in healthcare, retail and gambling machine product lines.To expand its presence, the company has been pushing into new businesses such as cloud computing solutions and development of ARM-based products. It has seen growing orders from these sectors. Digitimes recently sat down with Avalue's director of Intelligent Solution and System Jason Liu to talk about the IPC market and the company's business.Q: How is the IPC industry? What is Avalue's current status?A: Overall demand for IPCs is still growing steadily and most applications see increasing shipments.Most of our IPC products are based on the x86 platform with Intel's processors, while those with AMD's solutions are seeing a lot less demand than a few years ago. However, since two years ago, we have seen increasing issues with Intel's processors. One of the problems is that Intel has been constantly changing its CPU roadmap and has even removed many of its mobile CPUs that were originally meant to compete against ARM-based processors. Meanwhile, Intel is also having difficulties with its new CPUs, causing many IPC players to delay the launches of new products.Because of this, we have seen clients becoming less eager about upgrading their systems to the latest hardware specifications and the reluctance has become quite common in the IPC industry, undermining the business of many of its players.Meanwhile, demand for ARM-based solutions combined with Android or Linux operating system has been picking up rather fast to become a new business opportunity for us during the past few years.However, such a product line requires long-term investments in the software design and development. For Avalue, which had been an Wintel-oriented IPC players for a very long time, it was difficult at the beginning when we tried to transform our team to start focusing on writing codes for ARM-based processors, but it was a necessary step to take in order to obtain these types of orders.Although ARM-based solutions require time for development, its business opportunity is enormous. As most Taiwan-based IPC players are not familiar with developing ARM-based solutions, crossing into the related development could be challenging, but it also means that the market still has strong potential for growth.We have already been developing the ARM-based product line for over three years and are currently in talks with clients for several projects including voting machines.Q: What is Avalue's advantages over competitors?A: Recently, we have seen first-tier IPC makers launching pricing campaigns to compete for large-volume projects for general IPC applications such as point of sales (POS) and lottery machines, making these orders not as profitable as they used to be.To minimize the impact, Avalue has been shifting its business focus to product lines that it has advantages in such as medical, retail and gambling machines. We expect these product lines to boost our overall revenues by around 15% on year in 2018.In addition, we will also begin shipping in 2018 some large-volume general IPC orders that we obtained in 2017. There orders include lottery machines, fitness equipment and voting machines.Q: Is Avalue pushing any new business?A: For new businesses, Avalue is currently cooperating with Microsoft to push cloud computing-related solutions for smart retail and smart city applications. The special thing about the cloud computing solution business is that instead of the traditional method of selling only the gateway, we are offering full solutions covering front-end sensors, middle-end devices to back-end cloud computing server systems.We have assigned a special team to handle the development of the cloud computing server systems as well as firmware design for the end devices. Avalue is also working with Taiwan-based system integrators to help transform their standalone products such as sensors or devices, into total solutions. Since these system integrators' clients are mainly based in Taiwan, promoting their newly formed solutions to overseas markets including Southeast Asia, Europe, North America and Japan, will be a key business direction for us in 2018.Q: Geographically, what markets are Avalue focusing on?A: Southeast Asia is a new market for us. Compared to North America and Europe, which have been major revenue contributors to us for many years, our sales from Southeast Asia are currently still small, but the region is developing rather quickly in terms of infrastructure, making it a market full of business potential.We have also seen several Japan- and Korea-based IPC players moving their production lines to Southeast Asian countries to push industrial automation-related businesses. With these countries expected to be aggressively working on expanding their infrastructures, the facilities these Japan- and Korea-based players have invested in are expected to be able to obtain strong orders catering to these infrastructure projects.In China, our plan for 2018 is to continue focusing on products for medical care and industrial control applications. We currently still have weak presence in the market and the key goal is to expand our reach to more clients in China.Jason Liu, director of Intelligent Solution and System, AvaluePhoto: Company

India Electronics & Semiconductor Association (IESA) held its annual event IESA Vision Summit at the Leela Palace in India's high-tech center Bengaluru at the end of February. Taking place at the Leela Palace - one of India's best hotels featuring Indo-Islamic architectural grandeur, the event gave participants a striking impression of Indian businesses' real determination to take action in response mainly to the rise of China's semiconductor industry.India's trade deficit with China widened to US$46.7 in the fiscal year 2017, half of which was due to electronics imports from China to India. Hoardings and billboards featuring Oppo and Vivo phones are everywhere in India. Xiaomi also dominates online channels. Price-conscious Indian consumers are scrambling for electronics made in China.To turn the table around, India has planned to raise the import duty on electronics starting in April 2018 and institute several large-scale development projects for critical components. According to industry sources, the Indian government has engaged in a 10-year collaboration program with Korea's LG Display (LGD) with respect to developments of display panels, wherein LGD will oversee production yield and the participating Indian company will be in charge of sales operations. The 10-year long commitment includes a transfer of LGD's technology to the participating Indian company. The next target will be semiconductor technology.With a positive outlook on the future of India's industries, SEMI president Ajit Monocha, Synopsys president Chi-Foon Chan, former Tokyo Electron chairman Tetsuro Higashi and Applied Materials CTO Omkaram Nalamasu all attended IESA Vision Summit 2018 and gave talks on the role India can play amid upcoming changes in the industries. However, during the two-day event taking place in India's high-tech capital, the hottest topic was in fact the rise of China, which has put India on guard and also spurred a new wave of developments as India does not want to be left out of the high-tech boom.Attractive market opportunities in IndiaIndia's GDP is expected to reach US$5 trillion by 2025, making the country the world's fifth largest economy. The average age of the Indian population will be 29 years in 2020. The young country with a large number of digital natives surpassing most other countries holds tremendous opportunities that world-leading enterprises are all closely watching.Market research statistics show that the Indian electronics sector will reach US$130 billion in 2018. The smartphone segment with a CAGR of 25% has become a growth driver propelling the Indian electronics industry forward. According to the Indian newspaper Hindu News, Airtel joined forces with Google to introduce the world's first low-cost 4G phone based on Android Oreo, which works best on budget phones with less than 1GB RAM. The phone will be pre-installed with a few apps capable of running efficiently under the condition of low data transfer volume.The 4G smartphone named Mera Pehla is designed for entry-level and potential users. Furthermore, India's own Lava and Micromax also have plans to launch new Android Oreo-based phones with similar design concepts. The pre-installed apps will include Airtel TV and Wynk Music. These phones come with price tags that Indians call "budget-friendly." Such exciting offers set off a market boom, which could usher in a golden era for the Indian electronics industry within the next few years.Is India's golden age finally here?IESA Vision Summit 2018 gathered prominent industry leaders, including not only Synopsys president Chi-Foon Chan and former Tokyo Electron chairman Tetsuro Higashi but also Indian semiconductor experts holding influential positions in international companies. This shows Indian professionals have widespread involvement in the semiconductor business.According to Chan, the Indian semiconductor industry took its first step when Texas Instrument (TI) established its Indian subsidiary in 1985. Its engineering workforce has grown from 500 in the beginning to 15,000 today. Among semiconductor companies with offices in India, Intel set up operation in 1988, Synopsys in 1995, Qualcomm in 1996 and Xilinx, ARM, AMD, STM, NXP as well as MediaTek in recent years. India now has a total of 180 semiconductor companies. Synopsys India has a staff of 2,500 people, only second to the Synopsys US headquarters. Chan spoke highly of his company's operation in India.At least 2,000 chips are being designed by engineers working in R&D centers in India every year. Worldwide semiconductor revenues exceeded the US$400 billion milestone for the first time in the industry's history in 2017. The growth of more than 20% annually is also unprecedented in recent years. Chan thinks this has been mainly down to burgeoning applications, including PCs and handsets in the past as well as IoV at present. There is also a worldwide frenzy over innovative combinations of IoT and AI, which holds soaring market opportunities.With semiconductor being fundamental to all industries, governments around the world are more aggressively intervening in market developments than before. Merger and acquisition deals between chip makers totaled US$100 billion in 2015 and further rose to US$114 billion in 2016. But the amount suddenly dropped to US$49 billion in 2017. In the meantime, China, Korea and Taiwan are also ramping up investments in the semiconductor market. How can India remain uninterested?Among Synopsys' revenue generated in India, 90% is from international companies and only 10% from local IC design houses. According to IESA statistics, although India has 15,000 IC design engineers, most of them work for multinational firms. The local Indian IC design industry produces an annual value less than US$50 million. India is still in search of an elementary approach to fostering its own chip design business.India wary of the rise of China SEMI president Monocha commented that the Indian semiconductor industry has been taking two steps forward and three steps back but enjoyed a soaring 22% growth in 2017. Could this mean the Indian semiconductor industry has crossed a new milestone?"How can there be software without hardware?" said Monocha, who left his native country 44 years ago but stays true to his Indian roots. When he sees the Indian market is flooded with electronic goods from China, he calls on the Indian government to strengthen its commitment and engagement because without government support, India stands little chance in the semiconductor competition.Twinstar is the collaborating Indian company in the LGD project. According to a Twinstar executive who took part in the partnership talks, although the deal came into existence mainly because LGD would provide assistance on materials and equipment, the agreement to work together in technological developments was in fact the reason why India decided to fully invest into the display panel business.It is said that LGD has committed to a complete technology transfer within 10 years and will provide training for Indian engineers at its Paju plant. LGD is well aware that it will be at a disadvantage against China-based rivals such as BOE if it is unable to tap into the Indian market. According to the Twinstar executive, who asked to remain anonymous, the training program will take three years and the two parties have agreed that Twinstar will be in charge of product sales while LGD will ensure production yield so that Twinstar will have plenty of room to maneuver against China-based manufacturers.We can learn from the South China Sea disputes that when China makes a strong presence in the semiconductor and display sectors, third-world countries will be on their guard and attempt to form a strategic alliance against China. Such tension will give India a spot on the world stage. But India will be able to get help from Taiwan, Japan and Korea only if it can leverage its demographic advantages, provide infrastructure for industry developments and work with veteran industrialized countries in Asia.When China announced the plan to fuel US$250 billion into its semiconductor industry, what were Americans thinking? Where did India stand? Monocha pointed out that SEMICON China 2017 attracted 70,000 visitors, a lot more than the 45,000 attendees at the second-largest event SEMICON Korea. The US PCAST is closely watching China's growing influence and has issued a report to recommend countermeasures. For India to quickly catch up with China, it is important that the Indian government has a strong ambition. The central and local governments have to work together efficiently in order to bring fundamental changes. Furthermore, India needs partners. "Stop talking" - that is what Monocha suggests his home country should do. He wrapped up his speech by stressing that the future is in the hands of the Indian people. However, although China's expansion has fired up India, China, having made a major head start, will not be the lazy hare racing the tortoise. India should make all efforts to avoid losing the race.SEMI president Ajit MonochaSynopsys president Chi-Foon ChanFormer Tokyo Electron chairman Tetsuro HigashiPhotos: IESA

The Indian handset market has experienced drastic changes in the past two years. Xiaomi has dethroned Samsung, whose six-year development in India ha allowed it to remain the only non-China brand among the top five vendors there. The third, fourth and fifth largest vendors are respectively Lenovo, Oppo and Vivo.Amid the pressure of heightened import duty on handsets, Taiwan OEMs have no choice but to begin to set up production bases in India. Taiwan vendors dominating upstream manufacturing are still seen as bellwethers. But for the vendors, India is such a big country that attempts to grab market shares by funneling tremendous resources in a short period of time will only see short-term benefits. It is reported that Oppo's market share in India showed a significant decline in January due to a conflict of interest with distributors. The Indian market looks tempting but businesses may end up walking on thin ice. India's local brand Micromax used to enjoy a 20% market share but now it is down to 3%. According to Pankaj Mohindroo, president of Indian Cellular Association (ICA), local brands lack the ability to innovate and that is the key reason why they are losing market shares. However, there is more to the story.Rajeev Bajpai, president for WPG India, noted that Micromax was selling three million handsets per month at its peak. The other leading local brands including Lava, Kanbborn and Intex were also also to ship 2 million phones each monthly. However, monthly sales by the four local leaders have dropped from nine million to two million handsets amid growing competition in the market, which still has a large space for feature phones despite their shrinking share. Old and low-cost feature phone models from China are still widespread on the market, and the presence of Bird and Moto phones has worsened the competition.Policy blind spotsIndia's policy formation has blind spots. The government's bold decisions have created uncertainties, such as the case of the rupee note change. India's new import duty will take effect in the fiscal year commencing on April 1, 2018. Indian officials have vowed that global businesses eyeing the Indian market will have to set up factories in the country to prevent higher taxes from eroding their market shares. However, the problem is that India lacks even the most fundamental PCB manufacturing. The hiked taxes will definitely result in rising costs of handsets and other products that local consumers may not be able to afford.For example, 80% of the medical equipment in India is imported. It is said that Taiwan manufacturers supplying disability aids have been making good profits in India as it has a larger population of people with disabilities than Taiwan's total population. The Indian government actually offers appealing incentives to attract foreign investments, including support for startups. India claims it has an innovation cluster of 4,700 high-tech startups, the third largest in the world behind China and the US. According to KPMG, the Indian government offers a US$2.5 million grant for a US$10 million investment. However, people all know very well that the amounts of government subsidies are hardly enough to go around for domestic Indian companies, not to mention foreign or Taiwan businesses.In fact, most Taiwan manufacturers come to India because of OEM orders from Oppo, Apple or other top-tier brands - a bracket of vendors that local Indian brands are finding themselves being excluded. Rajoo Goel, secretary general of Electronic Industries Association of India, pointed out Indian big players have been unable to develop more appealing products or business models and thus are seeing their market shares on the decline in recent years. However, I think the underlying reason is that China's advantages from its industrial structure has enabled it to dominate the low-end and mid-range market segments in emerging countries.Indians think the country's demand for electronic products will top US$400 billion by 2020. Without a local electronics manufacturing industry, electronics imports to India will exceed oil imports at that time. India is heavily reliant on imported energy with at least 80% of its oil demand met by imports. People in India are now more concerned about growing demand for imported electronics brought by the rise in living standards. The Indian government is attempting to increase import duty as a way to foster local manufacturing. On the one hand, it is trying to improve investment conditions; but on the other hand, it has put up many barriers to investments, leaving foreign businesses confused and not knowing what to do.It is not the case that India has made no efforts on developing the display and semiconductor sectors. In the 1970s, India already had a semiconductor fabrication plant which was much like an experimental line at Taiwan's ITRI with no economy of scale. It was later destroyed by fire. Since then, there have been talks every year about imminent construction of a semiconductor plant but it has remained a far-fetched dream.A big country like India should have an independent semiconductor manufacturing industry whether making general-purpose ICs for commercial use or special-purpose chips for military or satellite applications. Its 2012 ICT industry development plan made it a government policy goal to build India's own semiconductor production facilities as well as display manufacturing plants. However, the plan is still on the drawing board to this day. Taiwan is India's best choice for partnerships in building up such manufacturing industries, but India has yet to realize this.Taiwan and India reprotedly are trying to forge some form of partnership, which is believed to be making good progress. However, India knows that there's no point offending China for the sake of Taiwan despite the rough India-China ties. Indian institutions often boast about their collaborations or MOU agreements with Taiwan's III, ITRI or Taipei Computer Association, but the problem is that these "collaborations" are all empty talks. The benefits of forming partnerships between Taiwan and India are apparent, but no substantial steps have been taken. Is India making progress?According to CounterPoint Research, handset makers worldwide enjoyed a 13% growth in profits in the third quarter of 2017. Samsung, having survived the Note 7 crisis, saw its share of profits increase from 0% to 25.9% while Apple's share exhibited a decline from 85.9% to 59.9%. China-based smartphone manufacturers' combined profits exceeded US$1.5 billion for the first time ever in the third quarter of 2017 mainly thanks to Huawei's Mate series featuring artificial intelligence (AI) chips successfully grabbing shares of the high-end segment from Apple and Samsung. Apple made a profit of US$151 per phone, far surpassing Samsung's US$31 and the US$13-US$15 profit per unit made by Huawei, Vivo and Oppo. Despite only earning a US$2 profit per phone, Xiaomi places more emphasis on building a loyal Xiaomi customer base, which has begun to threaten the market presence of the leading American and Korean brands.It is critical for businesses venturing into India to set clear market positioning and medium-to-long term strategies according to their own circumstances. Although India has a large market, the people's spending power is still limited and businesses have to find the pricing sweet spot for every product. For example, display panels priced under US$200 may be the best choice to win a sizable market.With respect to India's memory market, Samsung chose not to run its plants at full capacity such that the market stays hungry. It also runs its distribution channels only in a few places including Hong Kong, Shenzhen and Singapore to maintain market order and high prices. Semiconductor products contributed 70% of Samsung's profits in 2017, facilitating its overall strategic planning for brand marketing. We can all learn from Samsung's operations in the Indian market.With the rapid increase in data usage, India will have soaring demand for datacenters and servers. Perhaps server makers such as Quanta Computer and Wistron should lead other Taiwan manufacturers in the venture into India.India offers immense opportunities on market segmentation, for example, traffic planning and electricity meter programs across 100 cities. Representatives from Taipei Economic and Cultural Center in India pointed out that the Indian government is rolling out Wi-Fi networks in 20 cities but there is practically no Taiwan business putting in a bid. India is no doubt a huge market and success there will not come overnight. WPG has been doing business in India for over a decade. Lite-on is making chargers in India while targeting emerging opportunities in automotive electronics.In regard to handset production, manufacturing is fundamental to all industries. Indians should allow local companies taking part in manufacturing to build sustainable competitive advantages. However, the upcoming icnreases in tariffs will target display industry, PCBs and other products to force the construction of manufacturing plants in India. But India is missing the point. For the display sector, India actually is not expecting to venture into the capital-intensive LCD panel sector, but rather the lower-level manufacturing of LCD modules (LCMs). Manufacturing is instrumental to creating brand value. Although software has a high value, customer requirements are wide-ranging and a lot of changing factors may influence the continuing operation of a business model. On the contrary, hardware may have lower added value but the business model stands a better chance of sustaining operation. Taiwan and India complement each other very well. It's unfortunate that they have different agendas and cannot find ways to work together to promote mutual benefits.Indian businesses have to know where they stand and build sustainable operation and competitive advantages. The Indian market can be divided into high-end, mid-tier and low-cost segments. Businesses may find huge opportunities in the low-cost market segment, but the country's business development must not be dictated by the low-cost segment. It's like the overall development of a country - the middle class is the most important asset of the country. India with a growing population of young people holds demographic advantages.The US$200 segment seems to be the sweet spot for the Indian market today. Businesses able to capture opportunities in the mid-tier US$200 segment - whether it's TV or handsets - will enjoy great success.Representatives from Taipei Economic and Cultural Center in India also warned businesses of the financial risks associated with investment in India. With the New Southbound Policy, the Taiwan government provides businesses with high coverage investment insurance and large loans. However, both businesses and government have not comprehensively assessed the details and feasibility of these plans. And there is the China factor. Desptie its vows of a "peaceful rise," China's dominance in the world is a growing threat in many aspects. Taiwan's capabilities in electronics are well-known to the world. The Taiwan industry is generally of the opinion that the government's New Southbound Policy leaves a lot to be desired in terms of scope, planning and action.(This is the last installment of an article about India's IT industry and market written by Colley Hwang, president of Digitimes.)The low-end market segment offers huge business opporunties, but it should not dictate the development of India's economyPhoto: Colley Hwang, Digitimes, February 2018

With steady market growth and increasing economies of scale, India is an important alternative to China for countries that seek balanced industrial developments and try to avoid overdependence on the China market. Businesses from Taiwan and other countries have been keen to expand into India. Many world-leading companies such as Microsoft, Samsung, Qualcomm and MediaTek have focused only on setting up R&D bases in India, while Amazon is willing to make huge investments targeting rising e-commerce opportunities in India. However, developments with respect to manufacturing or software-hardware integration seem to be making little progress. As for the partnership between Taiwan and India, will it grow deeper or continue to run idle beyond 2018?Immense business opportunities in the next decadeAccording to BCG, by 2025 the average age of Indian people will be 29 years, the Indian middle class population will increase by 150 million and India's GDP will reach US$3.6 trillion. The Indians are convinced that their country will become the world's most appealing emerging market.India has vast regional differences. Punjab has strong food processing industries. Gujarat has booming shipbuilding and petrochemical sectors. Noida, located in Uttar Pradesh in close proximity to Delhi, hosts a cluster of global handset makers. If you visit only the developing cities such as Noida and Gurgaon, you might agree that India has tremendous potential and will grow rapidly to become the next China.My first visit to India 26 years ago left me with an impression that India was a hopeless country. Poor people crammed in slums seemed to have no future. Much has changed since but Delhi, despite its abundant green cover, is still plagued by heavy smog as the construction of subways and roads rarely takes environmental protection into consideration, causing clouds of dust to rise off the streets. Poor families burning coal to keep warm in winter makes Delhi's air quality worse. Taiwan's ambassador in India, Kwang-Chung Tien, who has lived in Delhi for five years, says there are at least 7,000 restaurants in Delhi offering barbecue food, which aggravates the air pollution problem. The roads leading to Gurgaon widened for the purpose of collecting tolls are crowded with more cars. The network of side roads seemingly disorganized to foreigners actually provides convenient shortcuts.Since Modi took office in 2014, his administration has instituted e-government, created job opportunities and planned 100 smart city projects with 99 cities already selected to participate. However, only less than 10% of the cities have actually kicked off the projects. This is the so-called "Indian way."Gurgaon and Noida, two satellite towns of Delhi, have become India's iconic high-tech centers. Gurgaon, north of Delhi, used to be a small village 30 years ago but it is gradually turning into a developing urban settlement with foreign investments funneled into the area, much like the rise of Shenzhen in China. Noida hosts a cluster of emerging industries such as handsets. Samsung has more than 5,000 employees stationed in Noida along with international handset component suppliers MediaTek and NXP. India's own leading handset maker Lava is also based here.It is no doubt that India is making leaping advances. Delhi's Indira Gandhi International Airport was ranked the second best in the world according to the 2016 Airport Service Quality (ASQ) report. Hordes of seemingly hopeless young people that were usual sights on the streets of India in the 1990s are no longer seen. Gone are also beggars and homeless people from the streets of Delhi. Traffic congestion is still common but the condition is a lot better than what is seen in the capitals of many ASEAN countries. Cars can run at normal speed on some sections of the roads, no longer having to watch out for cows, camels and even elephants coming out of nowhere.India's defense budget accounts for 2.2% of its GDP, lower than America's 3.3% and Korea's 2.6% but higher than China's 1.9%. But the ratio of India's defense budget among the country's total budget falls between 16% and 17%, a lot higher than many other countries.Prime minister Modi's hometown Gujarat, where he served as its chief minister for many years, looks to become India's Detroit. The manufacturing plant of India's economy car TATA Nano came to Gujarat when West Bengal, whose state capital is Kolkata, rejected the opportunity. Now half of the Nano cars on the market are made in Gujarat.Sanand, located close to Ahmedabad, has become India's automobile hub where TATA, Suzuki Motor, Hyundai Motor, Honda and Hero Motor Corp all have manufacturing plants. The once struggling TATA Motors now has 4,500 employees and its factories are running at full capacity. It also plans to make four-wheel drive cars in Sanand in the future. Furthermore, Uttar Pradesh is home to 200 million people and therefore plays a pivotal role in elections. The 'Act East' policy and flow of talentIndia takes great pride in its IT service industry, valued at US$80 billion for the fiscal year 2017 according to KPMG, of which US$65 billion came from exported services and US$15 billion from domestic information services. The amount is estimated to grow to US$87.1 billion in 2018. A total of 3.9 million people were hired in the IT industry in 2017, contributing 7.7% of the country's GDP. The Indians are confident that they hold at least 35% of the global outsourcing BPM market with promising outlook driven by flourishing developments such as artificial intelligence (AI).Many international companies look to hire software engineers from India. However, Indian software engineers have varying levels of skills. Many of them entered the workplace right after completing undergraduate studies. And a generation of more highly-skilled engineers with graduate degrees will begin to emerge after 2025 - a generation of people whose parents entered the workplace in the early 1990s.According to the Indian newspaper Economic Times, the top five software outsourcing companies - TCS, Cognizant, Infosys, Wipro and HCL Technology - added 20,687 employees in 2017, not only hitting a new low in eight years but also far below the 79,594 employees added in 2016. It is generally believed US President Donald Trump's hardline immigration policies and Britain's exit from the EU have far-reaching effects on India.Some commentators think the changes in automation and software technologies have prompted a critical transformation of the software outsourcing business model. More and more companies are after non-linear growth. According to statistics from the five leaders, the average revenue per employee is US$52,584. The size of staff is increasing at a slower speed, which signifies a change in India's software outsourcing business model.Recent college graduates hired by world-class enterprises such as Microsoft, IBM, Intel and Samsung as software engineers are given a starting salary about INR1.2 million (US$18,432). Taiwan-based companies like MediaTek pay an annual salary about INR700,000, still much higher than local businesses' INR250,000.The seemingly drastic difference in salaries is characteristic of the Indian job market. Graduates from engineering schools in India exhibit very different competency levels. Even if employers are willing pay high salaries, they may not be able to recruit graduates from first-tier universities. Opportunities for Indian engineers to start their own business began to emerge in 2012, but unless startups can offer attractive compensation, graduates from top colleges will not choose to work for little-known companies.India has 4,000 higher education institutions but the quality of education they provide is not uniform. More than 150 colleges are said to shut down every year due to poor performance. No one knows the best way to recruit first-rate talent.Partnership between Taiwan and IndiaBilateral trade between Taiwan and India amounted to US$7 billion in 2013-2014 but decreased to US$5 billion in 2017. India exports food and satellite products to Taiwan while importing a wide range of products from Taiwan. The two countries maintain quite a balanced trade relationship with Taiwan having a US$1 billion trade surplus. There is tremendous room for growth of the partnership between Taiwan and India.During a recent visit to India's Ministry of Electronic and Information Technology, we met with joint secretary Sanjay Kumar Rakesh. According to Henry HH Chen, who has been director of the Science and Technology Division, Taipei Economic and Cultural Center in New Delhi for more than two years, the Indian central government has a very complex organization. In general, the highest-ranking official leading a ministry is called the minister. A union minister usually oversees multiple ministries - a role similar to that of a minister-without-portfolio. A secretary is the equivalent of an administrative vice minister who is actually in charge of the implementation of government work. The joint secretary and additional secretary are department or section chiefs.According to Sanjay, India's high-tech development is geared toward "Digital India" and "Electronic India." The goal is to make India's own products to satisfy the market demand of more than 300 million handsets per year and to become 100% self-sufficient in handset component supply within 10 years. India has 20 so-called electronics manufacturing industry clusters. However, India has great geographical differences. For example, Delhi struggles with water shortage while the eastern regions have adequate water supply. If water resources are a concern, companies had better choose industrial sites in the eastern regions.The Indians used to believe that Taiwan would be an ideal partner. They wishfully thought Taiwan manufacturers would scramble for India's tremendous market potential. However, this never happened.India is a big country with a high self-esteem. It has strongly supported the People's Republic of China since the communist regime came into being in 1949. There had been practically no relationship between India and Taiwan until 1995. But still, Taiwan has little control over its relationship with India - a relationship which is in fact subject to the political and economic ties between China and India.The Lite-On exeuctive in charge of the company's factory establishment in India said the plant built in October 2017 as required by Oppo has 1,000 workers and a capacity of making two million chargers for mid-range and high-end phones per month. However, all kinds of taxes and the market structure make the Lite-On plant virtually unprofitable. According to Lite-On's executives there, product prices and rural markets still play critical roles in determining whether a company can be successful in India. However, if all efforts are focused on the low-end markets, a company is at the risk of incurring heavier losses.The Indians may not be as aggressive as the Chinese in pursuing wealth. They may desire a bigger fortune but still want an easy life. That may be the difference between the Indian and Chinese peoples.(This is the fourth installment of an article about India's IT industry and market written by Colley Hwang, president of Digitimes.)India's Ministry of Electronic and Information TechnologyPhoto: Colley Hwang, Digitimes, February 2018

Only 2.9% of the Indian population pay income tax, so the Indian government has to rely on all kinds of indirect taxes to fund public services. However, officials are well aware of the impact and implication indirect taxes have on the efficiency of business operation. India's nationwide uniform tax rate going into effect in 2016 actually spurred economic growth. With the corporate tax rate reduced from 30% to 25%, the Indian market is enjoying widespread prosperity. The number of large-scale shopping malls is on the rise, which shows the vibrant growth Indian businesses are now experiencing in contrast to the past.However, in the fiscal year commencing on April 1, 2018, the Indian government will be raising customs duty on imported electronics. The tariffs on mobile phones and smartwatches will increase from 15% to 20%; mobile phone components and accessories from 10% to 15%; LED/LCD/OLED displays from 7.5-10% to 15%; and perfume, furniture and other commodities from 15% to 20%. The Indian government's move to hike import duty is an attempt to force manufacturers to set up production bases in India.According to a preliminary report by the Indian customs authority, low-cost TVs from China sold through online channels will have at least 10% higher costs after the hike in import duty from 15% to 20%. Adding other duties such as commodity tax, manufacturers could pay up to 51% taxes for TVs imported to and sold in India. As such, many China-based manufacturers selling their products under brand names such as Nacson and Wybor through online channels in India may declare prices much lower than the actual value to avoid paying high import duty. The Indian customs authority will strengthen the control on such practices.The report also points out prices of imported TVs of well-known brands including Samsung and Sony will also have to increase by at least 5%. However, the gap between the top-tier brands and lesser ones will narrow. It is estimated the import duty on a mainstream 32-inch TV will be US$106, 39-inch TV US$147 and top-tier 65-inch curved-screen OLED TV US$417.Conflicts between interest groupsPublic organizations play interesting roles during the policy formation. In my meeting with Lava founder Hari Om Rai - who is also chairman of a non-government ICT organization and a major force driving the increase of import duty - he pointed out India has to trade short term profit for an opportunity to foster local manufacturing. Lava has assembled an R&D team comprising 700 members in China for the purpose of grasping market trends and planning a localized production system specifically for India. However, when asked if he intends to build his own supply chain in India, he replied that his focus would be on marketing. This shows the Indian industry still has concerns over building their own localized production ecosystem.When talking about the local Indian handset ecosystem, Pankaj Mohindroo, president of Indian Cellular Association (ICA), said that from a long-term perspective, India has no reason not to establish its own handset industry and supply chain. Rajan Mathews, director general of ‎Cellular Operators Association of India (COAI) , however, hopes the Indian government will postpone the auction of 5G spectrum until the global standards consolidate and then consider how India can react strategically.COAI thinks broad 5G rollout will come in 2020 and this will hinge on how telecom operators can profit from their investment. The real problem in India is that telecom operators will have difficulty getting quick return-on-investment out of 5G services with the chaos and fierce price competition in the telecom market. Unlimited data plans cost as low as US$12 a year in India. Only by integrating telecom operations with services can the Indian telecom market engage in business models with reasonable profit margins.To meet India's special needs, Taiwan and India can collaborate and establish a Taiwan product service center in Delhi to sell products on the one hand and to gain an insight into the Indian market needs while recruiting Indian talent on the other hand. The collaboration will go smoothly with better acquaintance between both parties. However, with the current "Made in India" initiative, the Indian government insists on providing only land and infrastructure but no additional support to meet the specific needs of Taiwan manufacturers. As they have enjoyed comprehensive support from the China government, Taiwan manufacturers naturally have little interest in India where it may take a long time for them to get a return on their investment.As a matter of fact, India will begin to collect higher import duty on mobile phones and components starting in April this year but the country is not well prepared. There is not even a PCB manufacturing industry. The Indian government has responded positively only in regard to the recruitment of high-tech talent. Aside from this, many Indian provincial governments have also entered into MOUs with Taiwan's Hsinchu Science Park to establish industrial partnerships.India Foundation consultant Jonathan Lulremruata, who helped Taiwan-based Foxconn and Lite-On build factories, disclosed he once represented the Indian government trying to convince leading Taiwan PCB manufacturers to invest in India but received no positive response as the manufacturers were deterred by market uncertainty in the country. The problem now is that India has needs but no one is brave enough to make a move.Modi's reformIndia's announcement to replace the INR500 and INR1,000 banknotes at the end of 2016 came as a shock to the world. It is reported that only five officials of the Modi administration were involved in the decision-making and cell phones were banned from cabinet meetings to ensure confidentiality.When rupee notes with an 86% circulation in India were being replaced, people were trying all kinds of bizarre ways to exchange their money. Some gave cash to their upstream suppliers as an advance payment for orders in the future. Some companies pre-paid employees their annual salary. Otherwise there would be taxes imposed on capital whose flows could not be accounted for. It is not clear what the Indian government has benefited from the change but it is believed 99% of hidden capital has surfaced. Whether the Indian tax system has improved as a result of the rupee note change remains uncertain. However, statistics have shown the change has had a negative impact on short-term economic growth. Nevertheless, the Indian people optimistically believe this is essential to financial reforms for India and expect GDP growth to hike from 6.43% in 2017 to 7.5% or higher.Only 2.9% of the Indian population pay income tax. People making less than INR40,000 (about US$613.2) a year are exempt from paying income tax. Tax evasion is not uncommon in India. For example, for a house traded at INR10 million, the seller and buyer may strike a deal to have half the amount paid in cash under the table, so they are taxed only for the declared half. The government institutes all kinds of sophisticated measures in an attempt to crack down on tax cheats and claw more taxes. But taxation in India is a complicated matter. For instance, different provinces have different tax laws and this makes it impossible to calculate the costs when trading across provincial borders. As such, the country with such a large population is unable to offer the benefit of a single market.The Modi administration introduced nationwide uniform tax code, trying to usher India into a new era. However, the interest groups behind public organizations and the failure of government agencies and think tanks to remaon impartial, form the hidden costs of India's reform. For example, telecom operator associations wish for lower costs of imported handsets and components. This is contrary to the policy to foster a local supply chain that handset makers actively support. But the handset makers know little about the workings and capital operations of the industry chain. Members of Manufacturers' Association for Information Technology (MAIT) are mostly distributors of computer equipment, not makers of IT products, and they have varying concerns. These are all problems that India has to overcome when addressing public issues.The Modi administration boasts "minimum government, maximum governance" and tries to minimize government intervention except for critical policies. The KPMG report repeatedly emphasizes that the Indian government now leverages e-government technologies to keep track of corporate tax filings, which also brings transparency to administrative procedures.Taiwan's ambassador in India, Kwang-Chung Tien, said the Modi administration requires a decision be made within three levels of hierarchy without going through layers on layers of bureaucracy. According to Modi, officials may make a wrong decision but it is much better than not making a decision at all.The India government may not have made well-thought-out decisions in its policy-making. For instance, it would take seven months to print new rupee notes even if printing facilities maintain 24-hour operation. What's amazing is that no matter how senseless the government's decision may be, the Indian people will stick it out. They have never organized a protest against the government's economic policy.Modi may have offended people with vested interest in the process of reform. Although Modi may still be able to win the next election, his party could lose the majority in the congress, said Tien.Modi does not seem to be looking for personal gain. It is said he sleeps only four hours a day, spends one hour doing yoga and works in the office for the rest of the day. Modi's prime minister office (PMO) is considered the most powerful institution in India.After he took office, Modi set India's foreign policy, "Act East," and looks to establish closer partnerships with the US and Japan in an attempt to counter China's growing expansion. India has also entered into a range of collaboration agreements to bring useful technologies to the country. For example, its collaboration program with Japan is said to include high-tech talent incubation. India can certainly rely on locally trained engineers and technicians for fundamental technological developments. However, with an overemphasis on science and technology, India still looks like a novice in the world of business despite strong achievements in military defense and satellite advancements.(This is the third installment of an article about India's IT market and industry written by Colley Hwang, president of Digitimes.)Increase of tariffs on electronics imported to IndiaItemBefore Apr 1, 2018After Apr 1, 2018Mobile phones15%20%Mobile phone components10%15%LCD/LED/OLED displays for TV7.5-10%15%Smart watches10%20%Data source: KPMG, compiled by DigitimesPankaj Mohindroo, president of Indian Cellular Association (ICA)Photo: Colley Hwang, Digitimes, February 2018

India is eager to duplicate the China experience and it knows well the role Taiwan makers have been playing behind the success of its neighbor. Despite its economic challenges, India prides itself in the fact it is a democratic country and believes its market has taken off. It thinks Taiwan businesses are reluctant to foray into the India market due mainly to their shortsightedness. But for Taiwan firms, they would enter the India market mostly at the request of OEM customers, as their priority is given to clients from China and other countries, over a lower-tier India market where product structures are complicated and customers are too price-sensitive.Until they are sure how their profits can be generated, Taiwan businesses will remain cautious about venturing into the India market. There has been no consensus about how much more weight should be given to the India market, despite the fact that the Taiwan government has identified it as a top target of its New Southbound Policy devised to boost trade partnerships with ASEAN and South Asia.Homegrown industrial chainsIDC statistics showed that the India market recorded total smartphone sales of 132 million units in 2017, still lagging behind sales of feature phones. Despite the belief that smartphones will soon completely replace feature phones, the India handset market remains too "opaque" to support such a belief: There are 250 million households divided by large wealth gaps, and vendors deliberately segment their markets believing that as long as they can identify the best market segments for their businesses they can have solid presence in the India market.As far as the handset industry is concerned, India vendors who are keen to operate more efficiently would rather go to China to find products that meet their own needs. This way, it will take only 2-3 weeks for them to ready shipments for distribution at retail markets, compared to at least nine months starting from designing their own products from sractch to delivering them to the retailers - which would be a heavy burden in terms of investment and time-to-market.India's homegrown handset brands have been criticized for operating like trading companies that seldom involve the local supply chain. According to Lin Zai-li, former president of WPG Holdings' South Asia operations, India has enjoyed playing the role of traders during its years of colonial rule by European countries, and therefore know little about supply chains. This, coupled with individual groups' vested interests and incentives provided by China OEMs, has made the India market a complicated one.The India market has seen many smartphone brands from China. Citing Bird-branded feature phones as an example, WPG's India operations president Rajeev Bajpai has noted that the phones were manufactured and made available in China 7-8 years ago, but they are now dumped in the India market. He added that such low-end, fully-depreciated feature phones without involving any local R&D are flooding the India market like a "cancer" that undermines the real value of the local market.In India's traditional consumer electronics industry, big players including Videocon are still plagued by funding and design capability issues, and their manufacturing capabilities are lagging far behind international standards. Among local handset makers in India, Lava International has been widely recognized as an aggressive player. Its chairman Hari Om Rai says Lava now maintains a 700-member R&D center in China, designing handsets in accordance with domestic needs for production by its China partners.Jonathan Lalremruata, who founded Wipro Taiwan in earlier years and now provides consultancy services to Taiwan's Lite-On and Foxconn (Hon Hai), notes that India still lacks the fundamental PCB industry, and that his company once tried to cooperate with India's Ministry of Electronics and Information Technology to introduce PCB makers from Taiwan, but in vain. This is because most Taiwan PCB makers have completed deployments in China, and therefore there is not enough incentive for them to set up PCB plants in India, given that their existing production capacities have yet to be fully occupied and that the India market is not yet ready.Rising starsNevertheless, the lackluster electronics industry in India is not without its own progress. Lava chairman Hari Om Rai believes that the India handset industry will return to a normal track of development, indicating that his company posted encouraging revenue performance in the past quarter and that time will stand on the side of an India that boasts a large young population.Lava InternationalAlso chairing a committee of India's Information and Communications Technology Industry Association, Rai said that family is his top concern, followed by the nation and then the company. While enterprises in Silicon Valley and China have taken off along with the emergence of their countries as world economic powers, India must identify its own public value before it can trigger its overall growth momentum, Rai stressed.As a leading local handset maker with annual revenues of US$1.2 billion in 2017, Lava set the highest monthly sales record of 2.5 million handsets in the year, with one third of them being smartphones. The company has started small-volume shipments to neighboring countries such as Sri Lanka and Nepal.In terms of long-term competitiveness for enterprises, Lava indicates that visible products and technologies are quite important, but the ecosystems and corporate cultures developed by enterprises are even more crucial in sustaining their competitiveness. Now maintaining total direct and indirect workforce of up to 30,000 people, Lava places market development and management as its top task, stressing that R&D and product designs count more than product manufacturing in fulfilling the task.In China, Lava now has 700 designers of its own, 13,000 contracted employees serving at sales points, and another 4,000 handling production and sales coordination. For Lava, it is equally important to understand the terminal markets and control the pace of product development and launch. The company believes that in the Internet era, there is little difference in the market information that businesses obtain, and therefore whoever is willing to engage in long-term deployments can become the final winner.Rai thinks that the China brands whose products will dominate the global markets will be those with long-term efforts to develop and serve the markets, such as Huawei and Lenovo, but not ones such as Xiaomi that rely heavily on pricing strategies. India can surely use high tariffs to check imports of foreign brands, but the corporate cultures of its local brands are what really matter in countering competitions.MoMagic TechnologiesMoMagic Technologies, a mobile software, app and content developer, now has 180 Indian employees and 150 Bengali ones. Its founder and CEO Arun Gupta earned his bachelor's degree in electronics and telecommunications from a public engineering institute in Indore, India in 1991 before joining HCL as a software engineer and then serving as a senior software engineer at India's DCM Data System from 1994-1996, when he was dispatched to station at DCM's US partner IBM. Later, he served as director of MediaTek India from 2002-2011, handling R&D, marketing and management operations before founding the startup company with financial support from MediaTek and Foxconn, which hold 23.5% and 10% stakes, respectively.Arun believes that software services given to highly differentiated customers involve higher gross margins, but such services also entail the difficulties in building business models. In contrast, hardware products offer low gross margins, but their business models are easy to maintain over the long term. Achieving the coexistence of both software and hardware, and making supply chains more efficient, better customized and more valuable are the only formula for successful business management.MoMagic now mainly offers mobile app services and operates a joint venture with Lava to provide app management services to 5,000 distributors under Lava. In India, there are now over 100,000 smartphone distributors. And MoMagic basically relies on service fee incomes to finance its R&D programs.Lava and Spice are MoMagic's major customers in India. The firm has set up partnerships with Symphony in Bangladesh, while also extending its business reach to Sri Lanka. In addition, it also cooperates with a China mobile power supply company to expand their market influences through intensive exchanges, with both sides sharing offices in India.MoMagic raked in annual consolidated revenues of over US$16 million in fiscal 2017, and its subsidiary serving e-commerce operators in Bangladesh also posted whole-year revenues of over US$3 million. Arun has decided to use the revenues and earnings to support his firm's R&D and personnel expansion while maintaining very close cooperative ties with MediaTek and Foxconn.Commenting on the declining market shares by India's local handset brands, Arun opined that India's lack of independent design houses is a big problem, but the biggest problem is that the handset makers have little knowledge about how to work out their own product roadmaps. Basically, it will take only 2-3 weeks for vendors to source handsets directly from China for sales in India, but if they want to adjust the product strategies based on market needs, it will take them at least nine months to complete, according to Arun.Many India handset vendors prefer shortcuts, but China upstream suppliers usually rule out India vendors as their top-choice customers due to product planning and cost concerns. Accordingly, India handset makers, in a disadvantageous position in terms of supply chain priority, will be driven out of the market in the long run. In fact, many vendors have hit a snag, including consumer electronics brands Intex and Videocon, which started out selling PCs and video products. Despite working hard to develop sales channels, they are plagued by poor product roadmap planning capabilities.Among major India handset brands, Arun said, only Micromax and Lava are willing to invest in backend R&D projects. In particular, Lava boasts a strong R&D team in China, responsible for designing products needed by the India market. Backed by their abundant experiences in managing channels, both Micromax and Lava can coordinate well with China suppliers to roll out handsets dedicated to the India market. Nevertheless, while major China brands enjoy robust financial strength and product portfolios, India handset brands are really hard up. Now in India, Oppo and Vivo ads can be easily seen on TV channels, and promotion ads by more China brands can also be seen on roadsides. India handset makers really need more financial resources to support their competition against China vendors. But what makes situations tougher for India makers is that the credit-crunch India banking system has become conservative in extending loans since the government scrapped the largest currency notes - INR500 and INR1,000 - in November 2016 in a fight against unaccounted wealth and corruption.Arun harbors the hope of leading his company toward South Asia and the Association of Southeast Asian Nations (ASEAN), and in this regard, joining forces with Taiwan is his best choice. Arun will set up a new company in Taiwan, with all the related documents already up for regulatory approvals. MoMagic hopes to boost the number of its employees in Taiwan from the initial 15 to over 40 in the starting two years, and it also plans to raise funds through listing shares on the India stock market in 2-3 years. The sluggish performance of the India property market has discouraged investors from funneling large amounts of funds into realty transactions, making stock exchanges the best outlets for their investment funds. In 2017, aggregate India stock exchange turnovers posted a sharp annual growth of 28%. Accordingly, it remains the best choice for India startups to create favorable leverage conditions with public capital funds.MobiQuest Mobile TechnologiesFounded in 2008, MobiQuest Mobile Technologies is dedicated to helping business brands manage social networks to expand connections with consumers, and its founding partners and its predecessor's managers all used to provide professional marketing services in India for many of the world's top 500 enterprises. In designing apps, dedicated web pages and social networks for customers, MobiQuest can utilize big data analysis to help customers better maintain their key clients and adjust their marketing paces to maximize the values of their marketing operations.Over the past 10 years, MobiQuest has extended services to over 200 business brands, allowing them to build connections with over 65 million consumers through its awarded digital and mobile marketing platform M'loyal and recording transactions with over 500,000 consumers per day. With the increasingly bright prospects for big data and FinTech, MobiQuest is emerging as a "star of tomorrow" in India.The company now has 70 employees with its revenues for 2017 reaching INR180 million (US$2.67 million), but its daily transactions involving half a million users have prompted Alibaba and Softbank to become investment partners during its next round of financing. It has never sent any of its staff to Taiwan before, but MobiQuest will visit Computex Taipei 2018 to be held June 5-9 to explore the possibility of cooperating with Taiwan's ICT hardware makers.MediatTek IndiaWith a total workforce of 15,000 people in its global operations and ranking top in many domains, Taiwan-based IC design house MediaTek now hires 600 employees in India, including 250 in Dehli, 330 in Bangalore and 10 in Mumbai, a new foothold.MediaTek's footholds in India mainly function as R&D and technical support bases. MediaTek India president Anku Jain notes that MediaTek is a high-tech company earmarking 20% of its annual revenues as R&D expenses, with confirmed investment projects for the next five years estimated at US$6.5 billion, including US$350 million in India. He stresses that how MediaTek India will find and keep foremost talent is very crucial to the entire MediaTek Group.Generally speaking, tech giants such as Microsoft and Intel usually hire India's top-class fresh university graduates with an annual pay of INR1.5 million (US$23,114.85), and then groom them according to their specific corporate cultures. MediaTek India can hardly source all its employees from the top-ranked Indian Institute of Science (IISc), but it can manage to hire graduates from other national science and engineering colleges with annual pay of INR1-1.2 million, compared to only INR 700,000 payable by local handset makers to fresh employees.In developing India's domestic handset market, most India vendors adopt an international trade-based business model, procuring handsets directly from China for sales in India. Such a model can bring short-term benefits, but lacks long-term value. Anku believes that local handset vendors in India will certainly face the pressure of consolidation, and whoever owns more cash will dictate the outcome.Now, China's smartphone brands Vivo and Oppo have their advertising signs easily seen on the streets in India, while Xiaomi focuses on promoting sales through online channels. They have adopted the same business models to develop the India market following the saturation of the China smartphone market, imposing great pressure on India's local handset brands and Samsung in terms of market shares in the South Asian country.(Note: This is the second installment of an article about India's IT market and industry, written by Colley Hwang, president of Digitimes.)Lava chairman Hari Om RaiPhoto: Colley Hwang, Digitimes, February 2018Rankings of India science and engineering universities and collegesRankingsTitlesTimes Higher Education World University Rankings1Indian Institute of Science(IISc)292IIT-Bombay443IIT-Kharagpur604IIT-Roorkee655IIT-Kanpur816IIT-Delhi867Tezpur University1008IIT-Madaras1039IIT-Guwahati11210Punjab University114Source: Taipei Economic and Cultural Center in India, compiled by Digitimes

Shipments of smartphone-use application processors in China are expected to decline 18.2% sequentially in the first quarter of 2018, according to Digitimes Research.Disappointing smartphone sales during the fourth quarter of 2017 have led to inventory adjustments at chip suppliers in the first quarter, said Digitimes Research. Fewer working days caused by the Lunar New Year holidays also affected shipments of smartphone application processors in China.Shipments for the first quarter of 2018 will still be 33.6% higher than year-ago levels, when shipments reached their low point on a general slowdown in orders placed by China's smartphone vendors, according to Digitimes Research's quarterly tracker report on China's smartphone AP market.Qualcomm has expanded its China-based client portfolio to include Xiaomi, Oppo and Vivo. Shipments to Xiaomi will make an important contribution to Qualcomm's smartphone AP sales growth in the first quarter of 2018, Digitimes Research noted.MediaTek is expected to see its market share rebound starting the first quarter of 2018, as sales of its Helio P series start to gain momentum, Digitimes Research said. Nevertheless, MediaTek will continue to encounter rising competition from Qualcomm, HiSilicon and Spreadtrum.

For a professional media outlet dedicated to studying IT industry developments, the most important responsibility is to present accurate observations at crucial moments. India will enter its fiscal 2018 on April 1, and the country, besides adjusting budgets to reflect its national policies, will enforce new tariff measures such as hiking import duties on handsets, TVs and related key parts and components. Is this a move designed by the India government to address the ever-expanding deficit in trade with China or to drive the localization of related industries? India's home-bred handset players Micromax, Lava, Kabornn and Intex have seen their domestic market shares fall under 3% for the moment although they were top-ranked ones during my trip to India two and a half years ago. Will the tariff protection alone be able to help revive India makers?India customs authorities have warned that imports of 32-inch TV sets from China will face drastic cost increases, the import duty on handsets will be boosted to 20% from 15%, and tariffs on imported LCD, charging devices and other related parts will be raised to 15% from 10%. China makers will bear the brunt of the impact from the tariffs adjustments, but what about Taiwan makers?Is it the best time now for Taiwan businesses to enter the India market or should they observe further and wait a little longer? In exploring the opportunities in India, should they give priority to securing the services of the local talent or to capturing market share? And how can they best foray into the market, through building joint ventures, making sole investments or simply serving as behind-the-scenes providers of components and turn-key solutions? India is a pluralistic market with great depth, and therefore it is impossible for Taiwan businesses to rely on junior managers or plant managers to handle the local market there.Battles raging in the fast growing mobile phone marketSince 2012, the India smartphone market has grown fast. But its neighbor China has been miles ahead in the smartphone space, having already developed a homegrown supply chain - backed by the vast domestic market and also gradually expanding its global presence - that has grabbed seven seats among the world's top-10 smartphone brands. India is keen to emulate China's success.In India the number of people who own handsets is estimated at about 700 million at present, of which about 300 million use smartphones, and the number of smartphone users is expected to break the 400 million mark in 2020. And according to forecasts by IAMAI and Kantar, the number of Internet users in India - via fixed-line and mobile networks - will hit 500 million by June 2018. This is the key factor which India deems will attract investments from foreign businesses.India has a total population of 1.25 billion, translating into 250 million households (granted that each of them has five members on average). In theory, this means unlimited business opportunities. But telecom operators use low rates to subsidize consumers locked with terminal devices, leading to extremely unreasonable market structures. To attract first-time users, telecom firms now charge only US$12 per year from consumers using old-spec handsets carrying a unit price of US$25 locked and supplied by local handset makers, thus allowing telecom operators to enjoy a fast expansion in the number of new handset users.China's vendors have been keen to tap the India market, with substantial success. China smartphone brand Xiaomi has claimed it is not running any promotional ads, turning all savings from advertising costs into consumer benefits. In contrast, other China vendors such as Vivo and Oppo have launched massive promotion and advertising campaigns to enhance brand recognition among India consumers, sponsoring cricket contests and posting ads at subway stations. While these top China brands have established strong footholds in India, Bird-branded feature phone models - those that were rolled out 7-8 years ago in China and can hardly be found in China now - are still available in India, serving the entry-level market segment. These Bird phones carry virtually zero cost as they have been fully depreciated.For Samsung, its advantages in key components has helped secure its firm leadership in the high-end smartphone market segment both gloablly and in India. In 2017, Samsung scored profits of up to US$50 billion, with 70% of them coming from semiconductor transactions that were mostly conducted in Shenzhen, Singapore and Hong Kong, preventing second-tier markets from having unrestricted access to supplies. This gives much space for Samsung to maneuver its smartphone business. In India, for instance, Samsung has managed to command a share of over 60% in the high-end smartphone market segment, leveraging mostly its Galaxy A and J series that boast high price-performance ratios, instead of the flagship Galaxy S and Note series.Backed by multiple favorable factors, India unseated the US in 2017 as the world's second largest country in terms of app downloads, next only to China. According to a report issued in mid-January 2018 by App Annie, the US saw a negative 5% growth in app downloads over the past two years, while India posted a whopping corresponding growth of 215%. Moreover, India consumers use an average of over 40 apps per month, higher than those recorded by their China and Brazil counterparts.There are now over 700 TV channels in India, and many people there watch TV using smartphones. At the moment, US-based Netflix and Amazon Prime Video offer free services for the first year of usage in India, and local telecom firms provide users with unlimited data access at low charges. And cross-subsidization has sent the market into a chaos that leaves foreign system operators mired in a "muddy" market there.The dominance of China vendorsWhile advertising signs of Oppo and Vivo can be easily seen at places from subway stations to high streets in Dehli, Xiaomi has highlighted its practice of sharing the marketing cost savings with consumers. Anyway, Oppo's move to invite Bollywood stars to endorse its products and Xiaomi's online marketing gimmicks are both designed to extend sales reach beyond their heavily saturated domestic market in China. For China vendors, India is one of those markets that can expand their global presence or fill up their production capacities.IDC statistics show that Xiaomi commanded a 50.8% share of online sales of smartphones in India in the third quarter of 2017. In February 2018, Xiaomi's major offering - the Redmi 5 featuring Qualcom's Snapdragon 632 chipset, a 5.99-inch screen and 4GB RAM - is priced at INR9,999 (US$154.58).Boasting a market capitalization of US$100 billion, Xiaomi has taken a "high-end, low-price" strategy in marketing its smartphone devices in India, seeking to build a strong user base in the South Asian country. Devoted to online marketing in India, Xiaomi has managed to unseat Samsung as the top-selling smartphone brand in India in the fourth quarter of 2017 in less than three years following its foray into the market. Earlier, 70% of the firm's revenues from the India market came from online sales, but now the company is gradually enhancing its sales through brick-and-mortar stores, according to Manu Kumar Jain, president of Xiaomi's India operations. Jain said that since the first Mi Home was set up in May 2017, the company has established 17 such stores to sell phones directly to customers and plans to expand the number to 100 by mid-2019.At the moment, Xiaomi has licensed a total of 750 service centers in 350 cities around India, with over 100 of them serving as Xiaomi's exclusive partners. Through the licensed centers, Xiaomi has managed to achieve a high rate of 95% for repair and maintenance services done within one day, including 86% for services completed within four hours. Xiaomi hopes to boost the ratio of sales through physical stores to realize its "new retail" concept through the gradual expansion of such stores. The company also plans to promote sales of 6-8 smartphone models ranging in unit prices from INR 5,000 to INR33,000, extending its product lines to cover midrange and higher-end models.Among other China players, Coolpad has announced plans to invest in the development of AI (artificial intelligence) applications in India. The company's annual global smartphone shipments are around 34 million units totaling US$3 billion in value, and its sales in the India market are also mainly conducted through online channels. The Moto smartphone brand, now controlled by China's Lenovo, has announced plans to set up 50 Moto Hubs in Dehli, where monthly smartphone sales account for 8-9% of total sales in the entire India market. Moto will also move to make sales deployments in the southernmost state of Tamil Nadu and other states, underscoring its ambition to tap the India market.Spreadtrum Communications, China's leading maker of 4G chips, has cooperated with India's Reliance Group, supplying twin-lens chipsets to support Reliance Jio smartphone models for sales in the India market. In addition, the firm's SC 9832 chipsets are also applied to India's Micromax Bharat 2 smartphone model and Samsung's Galaxy J2 and J3 models, which have enjoyed good sales in India. Spreadtrum has positioned itself as not just a smartphone chip supplier, and it will follow the footsteps of MediaTek to set up a research and development center in Noida, a suburban city of Dehli, to provide technical support and develop total solutions for IoT (Internet of Things) and other advanced applications.In contrast, Samsung, whose flagship Galaxy S series has not been given a major role to play in its compeition against China vendors, has seen its overall market share in India fall to 23%. But Samsung maintains as many as 150,000 sales footholds for smartphones and other consumer devices in India, offering repair and maintenance services to consumers around India, including those in rural areas. This has helped the firm's share of the off-line smartphone market hit a high of 43% in India.The India smartphone market is now almost dominated by China brands. Samsung seems to be pursuing the goal of only maintaining its market share and shipment volume there. For the India handset market, Vietnam is a key player in the supply chain. Samsung accounts for 23% of Vietnam's export value, and Vietnam plays a key role in Samsung's smartphone supply chain catering to the ASEAN and South Asia markets. Samsung has not disclosed any major investment plans to expand its production in India.(Note: This is the first installment of an article about the India's IT market and industry written by Colley Hwang, president of DIGITIMES.)Bird-branded phones rolled out almost a decade ago in China are still available in IndiaReliance's low-cost handset for the India market Photos: Colley Hwang, DIGITIMES, February 2018