Cisco Sets $1Bn Output Target from India
The company will starting manufacturing equipment within the next 12 months and is part of its efforts to broaden the supply chain
Global networking giant Cisco Systems would start manufacturing some of its equipment in India with a view to broaden its global supply chain. The factor, which would become operational within the next 12 months, should be generating $1 billion in total revenues including exports from India, says Cisco chairman and chief executive Chuck Robbins.
Robbins described India as the “force point of innovation and business for Cisco” and said the facility would develop cutting-edge technologies in India for a global market. Of course, he admitted that the government’s production-linked incentive (PLI) scheme was a key factor in this decision. Cisco arrived in India during 1995 and has its second largest R&D center here.
The company, however, did not specify what equipment would be manufactured in India but did mention that it would provide flexible, cost-effective delivery of next-generation services and applications and support complex cloud computing environments.
India a focal point for innovation, says Cisco boss
“Today, we are announcing strategic investments in Indian manufacturing capabilities as the next step in delivering cutting-edge technologies to our customers in India and across the globe. “Fueled by a rapidly developing digital economy, India is a focal point of innovation and business for Cisco, and we remain deeply committed to our partnerships here.” Robbins said in a prepared statement.
Additionally, it was also mentioned that the India facility would include testing and development centers, and a logistics network to support its domestic supply chain. Cisco will also expand its domestic hardware repair operations, and reduce the time taken for supplying hardware to enterprises in the country and abroad.
The importance of expanding supply chains
Robbins also articulated the need to further strengthen and diversify the Cisco supply chain once again. In recent meetings and over earnings calls, the Cisco CEO has noted that challenges related to supply chain management were improving, thus allowing the company to raise its full-year sales outlook.
“While the environment we are operating in remains dynamic, Cisco is better positioned today than at any time since I became CEO almost 8 years ago,” Robbins said. “While we continue to closely monitor the global macroeconomic conditions, the overall demand environment remains steady.” Readers would recall that Apple shifted some production to India for similar reasons.
In the past Cisco’s CFO Scott Herren had spoken about the financial challenges they faced in negotiating the supply chain problems that came calling post the Covid-19 pandemic. The work stoppages in China was among the biggest challenges Cisco faced with its networking equipment deliveries though it managed to fix things by sourcing components via brokers.
“When you buy from the broker network you pay a premium for those, and you see that reflected in the gross margins,” Herren had explained a year ago. In fact, Ericsson too had made a similar announcement last year of expanding its production capacity in India following its big deals to provide 5G equipment in the country.
Cisco isn’t the first – Ericsson and Apple came earlier
Ericsson’s head of operations in Southeast Asia, Oceania and India Nunzio Mirtillo had said in a statement then that with the introduction of 5G in India, the company was ramping up production of 5G telecom equipment in Pune in a phased manner to support deployments. “The production in India is part of our global production footprint with a presence across continents. This footprint has enabled us to secure a global, flexible, and resilient supply chain to respond quickly to market and customer needs, whereby India also benefits,” the statement had said.
Meanwhile, Cisco’s plans for India are coming barely a week after the company unveiled a customer financing option that aims to mitigate their financial challenges based on the overall uncertainty in the markets. It is called the “Cisco Capital Business Acceleration Program” and is facilitated by Cisco Capital.
The program allows customers to defer all payments up to 2024 if availed prior to July 29. These deferred payments would be based on the total amount financed and contract terms and is open to Cisco’s products and services, including hardware, software and some partner services and third-party hardware.
Customers are also allowed to defer payments on Cisco’s Refresh and certified remanufactured products and in many ways is similar to the Indian supply chain move that would also allow the company to tap into a theme that came out from a recent earnings call where Robbins sounded confident about continued product and service demand.
