Make in India: Chinese telecom giant Huawei to set up a unit in Tamil Nadu

NEW DELHI: Within two months of Prime Minister Narendra Modi’s visit to China during which he had promised an easy investment regime for Chinese companies, the Home Ministry has cleared a 19-month-old proposal from China’s biggest telecom gear maker, Huawei, to set up a unit in Tamil Nadu.

MHA cleared the proposal last week after it was submitted way back on December 13, 2103 by Huawei Telecommunications (India) Pvt Ltd for setting up a unit for electronics/telecom hardware and support services including trading and logistics activities at SIPCOT Special Economic Zone, Sriperumbudur in Tamil Nadu. This could now help Huawei to manufacture telecom gear for the first time for the Indian market, a point which was a major concern earlier for Indian security agencies given the possibility of the gear being infected with malware or bugs.

The company will however need to reserve key technical positions for Indian nationals and also get separate security clearances from the Home Ministry if it wishes to appoint a foreign national as its Chairman, Managing Director, Chief Executive Officer and Chief Financial Officer. The Department of Telecom (DOT) will also draw up “mandatory security parameters” in addition to technical, quality and interface parameters to enable the definition of clear security standards for technical equipment relating to network system and set up state-of-the-art testing facilities within one year to check foreign equipment entering the Indian market.

The security clearance for setting up of this manufacturing unit has been conveyed to the DIPP and Department of Telecom (DOT) last week, a senior home ministry official said. Huawei India has an existing SEZ in Chennai where it manufactures optical network transmission systems purely for export markets like China, APAC & the Middle East. Shortly after Narendra Modi became PM and launched his `Make in India' drive, Huawei also applied for DTA (Domestic Tariff Area) status for this facility so that it could either set aside a portion of the Chennai output for the India market or alternately set up a separate telecom gear manufacturing unit dedicated for the India market. The Security clearance from the home ministry is expected to hasten that process now.

The issue of conferring DTA status will now be taken up by the commerce ministry, an official said. Huawei recently invested some $170 million in an R&D facility in Bangalore. The 5000-seater facility went live in February. Some 3,500 techies are involved in software development/coding and associated R&D work purely for Huawei's global clients. 65% of all Indian telecom equipment presently is said to be Chinese-made, officials added.

In respect of Huawei, the government has stipulated conditions to both DIPP and DOT, as per the home ministry’s new ‘national security clearance policy’ which was cleared last month to ensure achieving the ‘Ease of Business’ and ‘ Make in India’ policy of Prime Minister Narendra Modi. One, the DIPP and DOT have been asked to tell Huawei to reserve critical positions from national security point of view like the Office-In-Charge of technical operations and Chief Security Officer to Indian nationals in Huawei Telecommunications (India).

Also, the MHA has stipulated that its clearance will be required in respect of the Chairman, Managing Director, Chief Executive Officer and Chief Financial Officer, if the position is held by foreign nationals. DOT has also been asked to ensure setting up of state-of-the-art laboratory and certification facilities for security certification of foreign equipment entering the Indian market, through both direct and indirect routes. The Home Ministry has also specified to DOT that there should be continious testing and audit of networks, after the deployment of such equipment and that all these requirements and systems should be in place in a one-year time-frame.