India Quarterly Structured Cabling Solutions Market Review

MARKET UPDATE Q2 2011 India Structured Cabling Solutions

Naveen Mishra Lead Analyst, India Networking Solutions & W ireless Services Research Telecoms Practice

IN THIS UPDATE
Summary of the AMJ 2011 Structured Cabling Solutions, based on CMR's ongoing quarterly review of the market in India. Includes overall findings of the report and key highlights of performance of different segments of the India SCS market, namely copper and fiber cabling and components. Descriptive charts to give a flavor of the detailed report.

OVERVIEW
The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Advance Estimates was 8.5 per cent in 2010-11, representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year-on-year (y-o-y), on back of manufacturing and within that, the capital goods sub-segment. During April-June 2011-12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010-11. The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, Indias GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011-12. In addition, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009. Furthermore, the number of millionaire households in India will grow from 2,86,000 to 6,94,000 between 2011-2020, at a growth rate of 143 per cent, as per a study by the Deloitte Center for Financial Services. Among emerging markets, India is likely to have the highest per capita wealth among millionaires with US$ 4.25 million placing it ahead of the US. In comparison to other BRIC (Brazil, Russia, India and China) nations, India is likely to experience the largest growth at 405 per cent in total wealth held by the millionaires.

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India Quarterly Structured Cabling Solutions Market Review

The Economic Scenario

India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010-12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012' by the United Nations Conference on Trade and Development (UNCTAD). India's FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January-June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year. Non-resident Indian (NRI) inflows in the first quarter of 2011-12 has witnessed a rise of 38 per cent as compared to the same period in 2010-11. NRIs invested US$ 1.54 billion in various NRI deposit schemes during April-June 2011. Private equity (PE) investments in India stood at US$ 6.14 billion in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by Chennai-based Venture Intelligence. The rise in the value of the deals so far (June 2011) recorded a growth of 52 per cent, as compared to US$ 4.04 billion raised during 2010. India's foreign exchange (Forex) reserves have increased by US$ 1.6 billion to register US$ 318 billion during the week ended August 19, 2011, according to data released by the Reserve Bank of India (RBI). The increase in Forex is largely attributed due to valuation changes. The Government has approved fund raising worth Rs 60,950 crore (US$ 13.24 billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011. India's merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago, according to Mr Rahul Khullar, Commerce Secretary. Exports in the referred period increased on back of demand for engineering and petroleum products, gems and jewellery and readymade garments.

MARKET OVERVIEW
India structured cabling market, comprising copper and fiber cabling solutions reached Rs.443.83 crore during Q2 2011 with a q-o-q growth of 7.0%. Copper cable contributed 80.5% of the overall market, and the rest by fiber cable. The copper contribution has increased little from last few quarters primarily because of the increase in prices for copper. Both copper and fiber solutions have cables and components into it, cables (both copper and fiber) contributed 53.39% of the total SCS market. The market has witnessed a moderate growth of 7.0% during Q2 11 over Q1 11. During Q2 11 segments like IT/ITeS, Government, Manufacturing, BFSI and Telco's performed better than other verticals. Indian SCS market showed signs of progress, with growth in investment in IT/ITeS, Telcos, Manufacturing and other enterprise segments.

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India Quarterly Structured Cabling Solutions Market Review

India being a relatively stable domestic demand driven market it is expected the SCS market will likely to grow further in coming times. Vendors are focusing more on achieving their business targets during these quarters, rather than spending on marketing/ branding and other GTM exercises. However they continued to organize regular trainings, but presently doing most of them in customer premise itself.

FIGURE 1
India Overall SCS Market by Value

250.00 194.13 161.15

Rs. Cr

200.00

150.00 Cable 100.00 42.85 45.70 Component

50.00

0.00 Copper Fiber

Source: CMR, 2011

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India Quarterly Structured Cabling Solutions Market Review

FIGURE 2
India Overall SCS Market Segments by Value Share

Residential 2.4%

Enterprise 97.6%

Source: CMR, 2011

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India Quarterly Structured Cabling Solutions Market Review

FIGURE 3
India Overall SCS Market by Industry Vertical Value Share

Others 19.9%

Telco 11.6% BFSI 11.3%

Education 7.0% IT/ITeS 19.9% Manufacturing 14.3%

Government 16.1%

Source: CMR, 2011

IT/ITes segment is the biggest vertical that contributes to 19.9% share of the total market. It was only in 2009 that the market witnessed a lower contribution, but with the recovery of the market from 2010, IT/ITES segment has came back with lots of shipments during year 2011. Government, Manufacturing, Telco and BFSI were the other verticals among the top five in structured cabling during Q2 11. Manufacturing and Telco verticals have witnessed good investments and it is expected that moving forward these verticals can get a bigger share of the market. Other emerging verticals like Media/Animation, Power-Utility, and Infrastructure have grown over the previous quarter and there are hopes to get more investments in the future from these verticals. Usually the Q2 witnesses a moderate growth rate as organizations have become cautious and are waiting before making an investment. However the coming JAS of 2011 is expected to witnesses a moderate growth over AMJ 2010. With the market looking optimistic it is expected that 2011 is going to be good market over 2010.

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India Quarterly Structured Cabling Solutions Market Review

FIGURE 4
India Overall SCS Market Indoor vs. Outdoor by Value Share

Outdoor 15.6%

Indoor 84.4%

Source: CMR, 2011

Of Rs 235.5 crore total value of cables deployed in Enterprises, 84.4% shipped for Indoor use and the remaining 15.6% was meant for outdoor deployment. The total Enterprise market stood at Rs. 432.97 crore and Residential market was 10.87 crore at the end of 2Q 2011. During the period fiber cables were laid down for campus/building connectivity of which fiber cables were used mainly for indoor connectivity, which included the datacenters and other horizontal connectivity.

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India Quarterly Structured Cabling Solutions Market Review

FIGURE 5
India Sub-Regional Split of SCS Market by Value - 2H 2011

East (9.8%)

South (36.8%) West (27.6%)

North (26.7%)

Source: CMR, 2011

During 2H 2011, South region continued to contribute to the maximum share (36.8%) of the total SCS market, which was Rs. 858.65 crore during 2H 2011. North, West and East followed with 26.7%, 27.6% and 9.8% shares, respectively.

VENDOR PROFILE
Digilink Smartlink Network System's DIGILINK business was acquired by Schneider Electric and is being seen as one significant development in the IT industry. DIGILINK retains the strength in verticals like government, financial institutes, education and control networking, whereas Actassi is a strong brand in hospitality, BFSI, data centers and ITeS segments. Post DIGILINK and Schneider Electric merger, and DIGILINK with Actassi brand coming together, they are now geared to go for IT/ITeS, BFSI, telecom, hospitality, and manufacturing sectors along with government/PSU, and retail. They are adopting a 360 degree approach to address all types of channels, across markets, covering global, regional and small SIs and resellers. They are introducing different incentive schemes for their channel partners. They have started focusing on Cat6. For fibre both single-mode and multimode 50-micron fibre are very popular as these are cost-effective and yield speeds supporting all upcoming technologies and remains on of their top concerns in coming times. They will be embracing newer verticals in structured cabling market as structured cabling itself has now got broadened and re-christened as Information Transportation System (ITS), which means even the design and usage of media like infrared, Wi-Fi and WiMax is now within the purview of ITS services. While they have planned residential projects, townships and commercial complexes as big new drivers, they also have educational institutes like schools considering ITS deployments as a must. Financial institutions are now spreading in C-class cities and rural areas which is yet another new vertical for them. They will be primarily focusing on the following verticals

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government (PSU), education, BFSI and healthcare. Priorities for Digilink remains to strengthen their market share in the enterprise segment in India and to ensure high brand visibility. Digilink leads the Brand Perception Index by a wide margin from other players it was the leading brand in the 'Users Choice Club'. And this strong presence was observed across the regions in India. Belkin has ventured into Structured Cabling business from March 2010 onwards. Belkin plans to focus on copper business as this is the larger part of the structured cabling market in India. For its structured cabling product line, the company is adopting a national distribution model, which is hived into the above mentioned two verticals. They follow a regional distribution model on a regular basis, where they have divided the market into various regions and each distributor handles their region exclusively. Belkin would position itself as the crme-de-la-crme of the market and would keep prices comparable to Digilink. Belkin has an extensive hybrid channel model of traditional IT and modern retail across multiple formats & consumer electronic stores across the subcontinent. Belkin has ambitious plans for growth and considers the Indian market to be one of its most strategic, with a stated desire to be a market leader in the tech and digital lifestyle space. Belkin launched structured cabling solutions for SMB's sizing from 25 to 100 computers. Belkin India had appointed ExeLAN Technologies as regional distributor for its structured cabling business. ExeLAN will drive Belkin growth plans for its structured cabling business across India. Belkin structured cabling offerings are going to be leveraged by ExeLAN Technologies in order to serve a wider range of customer base across target geographies. TE Connectivity continued to lead the SCS market during Q1 2010. TE conducted Training, seminars and road shows in several cities in India focusing not only major metros but also small B& C Class cities. The channel activities included specialized formal trainings as well as technology updates and informal customized training on latest technologies. They have launched bundling scheme specifically for regional distributors and have gained some good business through this scheme. They have launched bundling scheme specifically for regional distributors and have gained some good business through this scheme. They want to expand their reach and drive awareness of TE Connectivity beyond their existing customer base to prospective customers, suppliers, investors, recruits and the communities in which they operate. They are witnessing increase in number of small projects (both in booking and billing). They continue to focus in IT/ITES services and with the market becoming more aggressive they expect to do good business in coming quarters. They have also organized Partner event in major cities and have participated in Data Center Strategic conference. TE witnessed an increase in order during the quarter and an increase in book-to-bill ratio, reflecting strength across most of their end markets. They are excited about the completion of their acquisition of ADC, which had helped in positioning TE as a world leader in the rapidly expanding broadband connectivity market. Molex For last few quarters they are building up their business strongly and expecting good business from BFSI, IT, Manufacturing and Telco segments in coming times, mostly from the new service providers who have just started offering their business in different circles. Molex focused strongly in advertisements this quarter. They have sponsored Datacenter Strategic Exhibition in Bangalore and Delhi. Molex also carried out many Partner Events. They have also participated in a major Offsite CIO event and have conducted many channel partners activities. Molex has developed and generated new literature to keep pace with the new developments. A new Quick Guide reference catalogue is finalized for print. This caters exclusively to the packaged items in their portfolio. Molex also conducted a series of trainings and Certifications for their channel partners. Molex introduced Molex Premise Networks Intelligent Infrastructure solution focused on enhanced network management at the physical layer. MIIM continuously monitors and maps the physical layer, facilitates work order management, and enables patch guidance for technicians utilizing patch panel LED's for port indication. MIIM is also simple to implement and manage by utilizing industry standard components (no special

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India Quarterly Structured Cabling Solutions Market Review

construction patch cables, interconnection cables, or sensor strips are required) thereby reducing the incremental cost of installation. R&M have moved on to make more presence in the market by increasing its manpower and thus helping improve the business. They are also looking to expand their team further in 2011. Their partners are mostly based in Metro cities, but they wish to extend them to Tier-2 and Tier-3 cities as well. They are planning to spread their presence in the different regions of the India. They have carried out training programs in Delhi, Bangalore, Pune and Mumbai. Presently they have two distributors in Bangalore and in Chennai. Telecom has exhibit a lot of potential. R&M has introduced 2 products the Single Circuit Management System (SCM) and the Optical Distribution Frame (ODF) to expand the product portfolio. They are also looking to expand their team further in 2011. R&M is helping data centers to gain valuable space with a high-density patch panel. R&M is working in modular system for copper and fiber optic / Innovative module holders and shielding. Telecom has exhibit a lot of potential. R&M has introduced 2 products the Single Circuit Management System (SCM) and the Optical Distribution Frame (ODF) to expand the product portfolio. They are working on 48-Port Patch Panels for Data Centers so that there can be a increased performance in speed. Leviton North America's leading Cabling Player started operations in India in July 2009. Leviton Solutions conducted Product Certification Training in Chennai comprising of 9 partner companies and Certified 12 people. It was two day dedicated Paid Certified Training Program conducted in April 2010. They have conducted similar training programs in Delhi and in Mumbai. They have also launched Bali Trip (Summer Special) for Business Partners in May 2010 to do incremental revenue for Leviton for which 20 partner companies have qualified and participated in the program. They launched the Replicator Enclosures which is a High Density Fiber Solution for DataCentres. They also launched the Secure Keyed LC Fiber system The only truly lockable secure LC system built to work with any industry compliant duplex or quad adapter. They nd rd appointed Regional Sub Distributor in Delhi to Service 2 tier & 3 Tier partners in North India region. They also conducted Three City End Customer event at Bangalore, Mumbai & Delhi. Each of these events was attended by over 70 End customer companies. Leviton won many prestigious orders in this period from Financial, Hospitality, Data centre, Education & IT enabled Services segments. Leviton recently launched OptX Unity 40/100G Fiber System, a pre-terminated MTP system featuring new cable, connector, and termination technologies. Customers will thus be able to use a 24-fiber pre-terminated MTP system to transmit 100GbE speeds. Nexans is in growth Phase and is aggressively focusing to make its presence felt across the major verticals in India. They have performed well in the Q1 2010 and they are expecting a growth in coming times as well. The copper systems offered by the company, produce a range of optical fibre solutions to meet various applications and environmental conditions. This gives a degree of flexibility and scalability for campus and building backbones, horizontal cabling applications, device termination in data centers and storage area networks. Telecom, IT/ITES, Manufacturing and Government were the key verticals for them during Q1 2010.

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India Quarterly Structured Cabling Solutions Market Review

Top 5 brands in terms of overall Copper + Fiber cabling revenue during Q2 2011 were: 1. 2. 3. 4. 5. TE Digilink Molex Systimax R&M

LE ARN MORE
Methodology
The review program includes vendor revenue for Indian market, which excludes all export revenue and shipment made to SAARC countries All vendors and their key channel partners contacted, All market value are based on end-user price Total Structured Cabling Solutions = Copper cable+ Copper component+ Fiber cable+ Fiber component

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