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July 21, 2009
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India’s position as an R&D [research and development] destination is growing. The country has a large population of educated English-speaking people who can deliver competing quality at a fraction of the cost. It is also a part of the emerging markets that will experience the strongest growth over the next few years.
Honeywell International (HON) inaugurated its second Indian R&D facility in May 2009. The company set up the 600,000 square foot facility for 3,000 people at a cost of $50 million. Microsoft’s (MSFT) R&D facility in Bangalore played a key role in the company’s new search engine, Bing. The company has been strengthening its R&D base in India.
Texas Instruments (TXN) and Cadence Design Systems (CDNS) were among the first to come to India. They were followed later by companies like Nokia (NOK) and Ericsson (ERIC), both of which wanted to leverage off the low-cost base. Cisco (CSCO), Intel (INTC), Advanced Micro Devices (AMD), Dell (DELL), Accenture (ACN) and Bristol-Myers Squibb Company (BMY) are currently stepping up their R&D investments in the country.
India is currently cheaper than China, although the margin continues to narrow every day. The Chinese R&D industry gets serious help from the government in the form of student loans for completing PhDs, tax breaks for R&D outfits and special economic zones providing infrastructure to R&D facilities.
India suffers in this respect, since R&D has received little support from the government so far. Companies have gone ahead nonetheless, due to the stronger legal system that makes it easier to protect intellectual property. Historically, India produces a smaller number of R&D professionals compared to China and the U.S. With political stability returning, we might expect the situation to undergo significant change over the next few years.
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