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Chennai ranked world’s cheapest FDI location for electronics R&D

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Chennai ranked world’s cheapest FDI location for electronics R&D

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Chennai was also ranked second among the world’s most competitive locations, after Seoul and ahead of Chinese cities like Guangzhou and Shenzhen, based on the cost and quality of doing electronics R&D activities.

Chennai ranked world’s cheapest FDI location for electronics R&D

Chennai has been ranked the cheapest location in the top 100 electronics R&D FDI destinations as per the latest assessment using the fDi Benchmark, an investment location comparison tool by Financial Times.

Chennai has an estimated annual operating cost of $1.24 million for a 50-person R&D centre, which is cheapest in the world. The Malaysian city of Penang took the second spot with an estimated annual operating cost of $1.32 million, followed by Gurgaon with $1.52 million and Pune with $1.53 million.

Chennai ranked second among the world’s most competitive locations, only after Seoul, which houses large campuses of companies like Samsung and LG Electronics. In this ranking, Chennai was followed by Chinese cities like Guangzhou and Shenzhen. Three other Indian cities, Bangalore, Pune, and Gurgaon were among the top 10 cities on this list.

The location competitiveness benchmark is based on the cost and quality of doing electronics R&D activities.

This comes as a boost to the Tamil Nadu government, which is already taking steps to attract investors. While companies like Samsung and Apple currently have a strong presence in manufacturing, the presence of large R&D centre is missing, according to a Hindu Business Line report.

The Tamil Nadu government is trying hard to woo more investors in the electronics sector and is planning to organise a global investors meet in 2023.  According to a Business Standard report, the state has seen $50-billion investment through memoranda of understanding since 2019.

Pooja Kulkarni, MD & CEO, Guidance Tamil Nadu, reacted to the report saying the presence of the best institutions in higher education along with the best ecosystem for electronics manufacturing has made this possible. She added that the electronics manufacturing ecosystem is mature in the state, with global majors cutting across domains.

The state government is planning to announce an R&D policy soon. The focus will be on using the state’s human resources effectively, said Industries Secretary S. Krishnan.

Chennai currently produces nearly 20 percent of India’s electronics. The state’s Electronics Hardware Manufacturing Policy 2020 has targeted to scale the electronics industry output to $100 billion and raise export contribution to 25 percent.

India is expected to attract FDI investments of $120-160 billion per year by 2025, according to a CII-EY report. India ranks third in terms of attractiveness, and over 80 percent of foreign investors have plans to invest in India in the next 2-3 years, as per a report in The Economic Times.

According to the Institute for Management Development (IMD), India's developments in government efficiency are a result of relatively stable public finances (despite COVID-19-induced challenges), the optimistic sentiment of the Indian business stakeholders and the funding and subsidies offered by the government to private firms.

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