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Indian TV cos buy software licences to challenge China

Television makers in India are acquiring key software licences for value addition in domestic manufacturing of TVs to take on Chinese companies who dominate the global market.

Such licences are key for contract manufacturers in the country to graduate from original equipment manufacturers (OEMs) to original design manufacturers (ODMs). While the former is responsible for producing pre-designed products, the latter owns the design. Manufacturers in China, which now supply to some of the world’s largest electronics companies, started as OEMs decades ago.

On Monday, Dixon Technologies, one of India’s largest contract manufacturers, announced a pact with Google to acquire the licence for Android and Google TV platforms. Dixon isn’t the first though. In July 2021, Noida-based Videotex International Pvt. Ltd became the first manufacturer to obtain the licence for LG’s webOS platform for TVs in India, while Super Plastronics Pvt. Ltd (SPPL), which is also based in Noida, had acquired a licence for Google TV back in 2020.

Videotex makes TVs running on Android for brands like Lloyd, Hyundai, Realme, Hisense and Toshiba. It also has an in-house brand called Daiwa, and has onboarded another 15 brands to make TVs running on webOS. Dixon, said in an exchange filing on Monday, that it can produce up to six million TVs a year. Avneet Singh Marwah, chief executive of SPPL, said it will start supplying Google TV-based products to more brands by this year-end. It already makes TVs under the Kodak and Thomson brands, among others.

So far, TV brands would have had to deal with ODMs in China, who had exclusive licences to platforms like Android. This means that the Indian OEMs would have to pay the Chinese ODMs for all key components like open-cell displays, LED lights and cabinets. ODMs have partnerships with chip makers too, which means that the main board powering a TV goes through them as well. Companies like TCL, Skyworth and BoE Technology Group are some of the key Chinese ODMs.

By developing into ODMs, the Indian companies are essentially looking to handle a larger portion of the manufacturing process. “When you have the licence, then you’re sourcing everything yourself, using your own materials etc. Otherwise, you have to buy everything from them (the Chinese ODM). So, first you’re buying from an ODM in China, then paying me (the factory) and then reaching the customer,” said Arjun Bajaj, director of Videotex.

Marwah noted that India currently has a total TV production capacity of around 12 million units a year, which is expected to rise as exports grow. He also noted that the country still has nearly 200 million cathode-ray tube (CRT) TVs in use, which are yet to be upgraded to Light Emitting Diode (LED) and smart TVs.

To be sure, China has nearly threefold of India’s TV manufacturing capacity. However, geopolitical tensions and covid-related lockdowns have hit China’s capacity. An industry executive, requesting anonymity, estimated China’s capacity at 40 million smart TVs in 2021, which is expected to fall to 32 million this year, and may drop further to 28 million by December-end.

Building a presence in the design-led manufacturing sector has been among the key asks from industry veterans for a long time. While the government has offered a production linked incentive (PLI) scheme for various sectors,it has not been offered to TV makers.

However, experts pointed out that PLIs can only help build scale. If companies truly want to drive value from manufacturing and export from India, they have to add value by investing in design and R&D, and that process starts by acquiring licences, according to the experts.

“Any brand launching a smart TV using the Android platform will have to pay a license fee to Google. If a manufacturer already holds a licence from Google, then the brands typically bear the cost,” said Rajeev Khushu, ex-chairman of the India Electronics and Semiconductor Association (IESA). “While we do have local manufacturing of TVs in India, there are no Indian TV brands in the market. We had some, like Onida and BPL, and even a few smaller ones, but they died when the Korean companies entered the market with a wide range of variety in their product designs,” he added.

Anshika Jain, senior research analyst at research firm Counterpoint Research, said there were no domestic TV brands of note in the country. “Xiaomi, Samsung and now OnePlus are the top three TV brands in the country, and while these brands have been manufacturing TVs in India, white-label design manufacturing could bring in more choices for consumers — particularly in the affordable price ranges,” she added. SPPL’s Marwah said the company plans to get 40% of its revenues from exports in the next three years.

That said, acquiring licences is only a start for Indian firms. Building the value-chain for manufacturing should take at least three to five years, if not more. At the moment, most of the key components still come from China, while display manufacturing is only in the planning stages currently. Live Mint

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