The Hindu Business Line : India: The emerging R&D hub

EVER since Texas Instruments set up a research and development centre in Bangalore in 1985, more and more foreign companies have realised the benefits of carrying out significant R&D work in India. According to a study conducted by the Administrative Staff College of India (ASCI), 77 global firms have established R&D centres as direct subsidiaries, several others have formed R&D alliances with or have contracted research to local firms. They include telecom service providers and equipment manufacturers, chip designers, IT hardware companies, medical equipment makers, engineering design companies, consumer durables, automotive products, chemicals, plastics and pharmaceuticals producers.

Factors favouring India

There are several factors driving the scramble among global firms to set up R&D centres in India.

Low costs: The primary factor favouring India is low costs. The cost of a researcher in India is one-fifth that in the US or Europe. Companies which have shifted research work to India have reported substantial cost savings.

Access to qualified manpower: The second factor is the easy access to talent. India has a vast pool of high-quality, technically-qualified and English-speaking manpower. India's more than 250 universities and engineering colleges churn out over 2,00,000 engineering graduates and 5,000 PhDs every year. So, it is possible for the companies to ramp up operations rapidly. Oracle, for example, has been able to grow from 529 persons in 1999 to 2,400 today.

World-class standards: The base for software development can be gauged from the fact that India ranks second in the worldwide ranking of the number of assessment and maturity levels reported to the Software Engineering Institute (SEI) by countries with 187 assessments (including maturity level 5), second only to the US with 1,563 assessments. Forty two software organisations in India have attained CMM level-5 ranking out of 76 R&D organisations worldwide.

Infrastructure: India has a vast network of state-owned national research laboratories which have excellent facilities. In addition, the facilities available at the six Indian Institute of Technologies and premier institutes such as the Indian Institute of Science can be tapped by a foreign company.

Easy approvals: The government welcomes foreign companies setting up R&D centres. Approvals are easily given for wholly-owned foreign subsidiaries or joint ventures. Several development centres enjoy concessions. Most software development centres operate under the Software Technology Park (STP) and are entitled to a plethora of concessions such as duty free imports. The company that is truly leveraging India's strength in R&D is GE. It inaugurated its John Welch Technology Centre in Bangalore in 2000. It is a multidisciplinary research and development centre for all of GE's diverse businesses worldwide. This is the company's largest research output outside the US. It employs 1,600 persons (31 per cent are PhDs) and even carries on fundamental research.

Telecom: A host of telecom service providers and equipment manufacturers carry out significant research and development. They use all three models for carrying out R&D — wholly-owned subsidiary, joint venture with an Indian partner and R&D contracted to an Indian company. Motorola was one of the first telecom companies to realise India's potential for software development. It set up Motorola India Electronics, a wholly-owned subsidiary, for R&D. Motorola Global Software Corp is now integrating its two existing centres in Bangalore under a single roof.

The new facility, one of the largest captive R&D centres in India, will require an investment of $13 million and will be ready by 2004. Nortel has carried out significant offshore software development through agreements with TCS, Infosys, Wipro and SAS. It regards them as strategic partners for the long-term success of its R&D activity in India. All major technology labs have assigned part of their development activity to India. The products being developed cover a wide range.

Nortel also has its own R&D lab in New Delhi to develop remote access products for data communications. Ericsson has identified India as an important outsourcing location for R&D. Last year, Wipro purchased the Ericsson software development centres in Bangalore, Hyderabad and New Delhi. Wipro will continue Ericsson's development work in India through outsourcing. Ericsson chose Wipro for its technical depth, technical leadership and telecom domain expertise.

Chip designers: India has become the centre for chip design for almost all the major chip design companies of the world. Texas Instruments, Motorola, Intel, ST Microsystems and Cadence Design are all expanding their chip design facilities. Intel, which set up its India development centre in Bangalore in 1998, now plans to invest $41 million in building a new campus in Bangalore. Intel hopes to double the number of engineers employed to 2000 by end-2004. The centre is the largest non-manufacturing site for Intel. .

Cadence Design Systems is planning to expand its state-of-the-art facility R&D facility at Noida, set up as early as 1987, by adding 300 engineers. The centre now has 320 engineers and has invested $100 million since starting operations. ST Micro electronics' advanced design centre in Noida, near Delhi, employs over 950 professionals. It will become the company's largest facility outside the US when the centre touches a strength of 1,500 by the last quarter of this year.

Adobe's new state-of-the-art facility at NOIDA, built with an investment of $10 million, has filed for 10 worldwide patents. The Adobe Indian team conceptualised and developed the Acrobat Reader for Palm and Pocket PC. The Indian unit owns some of the key technologies in image and document compression — Adobe Pagemaker 7, Adobe Frame maker and Adobe Photo Deluxe.TheSwedish major, Astra Zeneca's $10 million R&D centre at Bangalore is engaged in the discovery and development of novel therapies for infectious diseases such as tuberculosis. The US-based Millipore Research has set up an R&D centre in Bangalore.The centre concentrates on microbiology and membrane filters.

Chemicals: Since 1994, DuPont has had a profitable alliance with a national research laboratory under the CSIR. DuPont Textiles and Interiors and the Pune-based National Chemical Laboratory have extended their research alliance for another five years. Dupont Polyester has entered into a strategic alliance with Reliance Industries to jointly develop advanced polyester process and product technologies in India. The Netherlands-based Akzo Nobel Car Finishes has established an international research centre at Hoskote, near Bangalore.

The centre, set up at a cost of Rs 12 crore would play a major role in the development of new products and colour formulae for the global market. FMC Corporation, a leading producer of chemicals for industry and agriculture, has established an R&D centre at the Indian Institute of Science campus in Bangalore. The centre undertakes research for agriculture products business, headquartered in Philadelphia, US.

Consumer durables: Samsung India Electronics is working with IIT Delhi for new designs of colour televisions, washing machines and air-conditioners to suit the Indian market. The company also plans to set up a consumer laboratory at IIT, where industrial designs students will work on projects sponsored by Samsung.

(P. Balakrishna is a freelance writer and B. Sidharth is a student at IIM, Calcutta.)

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