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Asian firms bet on India to set up R&D units to boost tech innovations

Business Standard:  January 09, 2019

Bengaluru: After US and European companies, now Asian firms are also betting big on Indian talent by setting up research and development (R&D) units, also known as global in-house centres (GICs), in the country to drive innovation in new technologies.

In the last one year, at least nine large business conglomerates from countries like Japan and Singapore have set up their captive technology centres in India to step up research and development in areas like Internet of Things (IoT), artificial intelligence, data analytics, among others. Experts say that apart from the country’s huge talent pool, its growing start-up ecosystem and cost efficiency are the other factors that have spurred the move.

“Asian firms have realised that many US and European companies have grown by leveraging Indian talent. So skill is the primary reason behind setting up Indian captives,” said Pareekh Jain, an engineering services consultant and founder of Pareekh Consulting. “These Asian firms also see India as a huge market which they want to serve through local presence.”

For years India has been an attractive place for global corporations to set up GICs. According to management consultancy firm Zinnov, out of a total of 1,257 GICs in operation in the country, 976 are devoted to core R&D. However, the landscape has traditionally been dominated by large US and Canadian companies who together account for 65 per cent of the GICs, closely followed by European firms.

"Currently, only around 7 per cent of the captives are by Asian companies. But, of late, we have seen more Asian firms setting up centres in the country — a trend which has gained momentum in the last 3-4 years," said Ravi Kiran, Senior Consultant at Zinnov.

According to Zinnov, Asian firms that have set up GICs in India recently include Singapore-based e-commerce company RedMart, Go Jet airlines and DBS Bank. In December Chinese smartphone marker, Oppo announced its plan to set up a GIC here while OnePlus too commissioned its unit in Hyderabad recently.

“We see tremendous potential in the R&D space in India, especially in software. In fact, we are scaling up our Hyderabad R&D centre and we expect this to become our largest R&D centre globally in the next three years,” Pete Lau, founder and CEO of OnePlus told Business Standard.

Around 30 companies from Japan already have their GIC here as do South Korean firms like Samsung and Mobis. The new entrants include Japan’s Nissan Motor and Rakuten. Nissan, which announced last month that it would set up a global digital hub for driverless cars in Thiruvananthapuram, wants to hire about 550 technology professionals by March 2019.

Similarly, Japanese internet firm Rakuten plans to drive most of its tech research from India and is all set to double its headcount in the country to around 900 over the next 12 to 18 months. "India has a vibrant start-up ecosystem. These Asian firms want to leverage that and also collaborate on future technologies. Some of them are even looking to acquire start-ups if there is a right fit," said Siddharth Pai, a former outsourcing advisor and founder of Siana Capital.

 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.