Structured Cabling: Crippling, but Marching Ahead

Hit by currency fluctuations and depreciation of rupee, the structured cabling market in India lost its charm in the fiscal year 2012-13.
Although it had recovered from the global recession in 2009-10 and had performed fairly better in FY2011 and FY2012, but several projects were seen shelved off in FY2013.

Vendors Snapshot

In the meagre `1,570 crore structured cabling market, over 18 to 20 players are struggling for a pie in India.
The market also witnessed lay offs at the end of 2012 and beginning of 2013 from big wigs which is another clear indication of volatility in the market.

In this financial year 2013, mid and a very few smaller players were blessed with modest revenue numbers, while big wigs such as TE Connectivity, Commscope, and Digilink felt the heat of the market.

TE Connectivity had recorded a sluggish growth. The company is yet to capitalize on ADC Krone acquisition. Despite the doldrums in the industry and degrowth, TE has not lost its vigor.

It is heading to benchmark across products and services, it is aggressive in B and C class cities, focusing on resellers, newer verticals, technologies, and it is expanding horizontally. The company is setting up a new factory at Devanahalli, it would be open for operations in 2014.

Commscope mainly relied on large and global accounts. As there was no significant large deals in FY2013, the company did not have a compelling growth story. It has recently began to target SMEs and government sectors. The company got some contracts from IT/ IteS, health care, and hospitality. It is offering two types of enterprise brands-Systimax and Uniprise

Digilink by Schneider Electric recorded a flat growth. Its local market performance is yet to improve. But the acquisition has given a boost to Digilink because earlier the company focused more on the domestic market but now the manufactured products are being exported to other countries as Schneider has a global presence.

Molex partnered with Delhi police to provide cabling installations for security initiation across all markets in the city. The company expanded 15% of sales into newer territories viz Jaipur, South Gujarat, Cochin, Chennai, and Chandigarh. It got some projects from ONGC, automotive, from government for state wide area network and from APDRP.

The fourth quarter in FY2013 was greener for R&M as it bagged a few significant deals. The company has won significant deal from an IT services organization-it is providing a large number of installations and providing over one mn nodes. It is a combination of Cat 6 and 6a technology. The other deals include one it has signed with two large global mobile organizations and another with a few large hospital chains .

ADC Krone's acquisition was a blessing in disguise for a few mid-level cabling vendors. R&M was one such player, a few significant deals shifted to it. One of the IT giants Tata Consultancy Services (TCS), which had a long term association with ADC, flew to R&M. DLink also grabbed a small pie of Digilink's domestic market share after it was acquired by Schneider Electric.

DLink's significant deals in FY2012-13 include CCTNS (for copper and fiber solution), Bharat Heavy Electrical (BHEL) for fiber solution, Asea Brown Boveri (ABB) for fiber solution, and Indian Oil Corporation (IOCL) for 10G copper solution installations.
Corning has won a few significant deals for its fiber solutions. It has remained active in the market since 2010-11-its key deals include Tulip Data Center (Panduit won copper category), Cisco, and Barclays.

The other mid-level player Nexans is also grappling in the market. Newer entrant 3M, which was active since its foray into the Indian cabling market, is grappling for the pie. The company seems to be in chaos as the top personnel in the cabling division, Navin Jacob Mathew, has quit.

Leviton's growth dipped in H1 2013 and it picked up after that and grew by over 40% in FY2013. It closed deals in IT/ ITeS, BPO, infrastructure, healthcare, and KPO. It bagged a deal from one online retailer, aviation industry, and Omega Healthcare in Trichy.

A few players have given up the cabling battle and have headed to focus on their core areas. Belkin and Belden have downsized cabling operations in India as they failed to meet revenue standards that was set. Belden's presence in the market declined considerably. Belkin closed operations in September 2012. Nexans is also more likely to scale down operations in India.

Cabling Tech Trends

Category 6a holds the reigns in the copper cabling category. Customers at present are opting for a combination of cat 6 and 6a on copper cabling and fiber. On cat 7 standard, just the cabling is defined but there is unavailability of components. Technically, there is not much difference between cat 6a and cat 7; there is only 1% increment in terms of performance. But there is considerable difference in pricing--vendors/ system integrators have no choice but to install cat 7 cable with cat 6a components. This might lead to the natural death of cat7. Cat 7a is still in the developmental stage. The entire industry is in a dilemma to either invest on cat 7 components when the performance is very less or to discard it.

In the fiber category, OM3 and OM 4 installations are more and it is the high end technology. Currently, GPON, FTTH, FTTX, and PON technologies are gaining prominence. Plug and play solutions are also gaining preference as they are easier to install and manage. Multimode (50/125, 62.5/125um) OM1, OM2, and OM3, single mode (9/125um) in the fiber category are ruling the market. OM4 fiber cabling was seen last year in parts. OM3 fiber cabling is gradually picking up and plug-and-play copper and fiber solutions have been employed in key installations. Outdoor plant fiber cabling also saw an increase in usage last year. OS2 (Low Water Peak Fiber-G652.d) is the standard for most deployments. OM4 in multi-mode technology will see increased deployment to support 40G and 100G applications. Fiber requirement has gone up to address campus networking situations.

Intelligent cabling has stolen the show of late. IT managers are demanding intelligent cabling as it enables proactive network monitoring and fault diagnosis. It is more efficient, reduces costs, and resolves issues like unplanned downtime, inefficient manual moves, reliability, redundancy, additions and changes, redundant ports, and inaccurate records. It will provide real-time management of the physical layer. Having an intelligent cabling solution enables an immediate rectification, as this system can indicate where exactly the network is experiencing problems. It can track IP based addresses and the network manager can access, control, and manage them from one central location, thereby troubleshooting them remotely.

Customers are demanding intelligent cabling solutions because traditional network management tools offer limited value because information through these are collected manually. But the manual process is time consuming, sometimes inaccurate, and can prove to be costly in terms of money, man hours, and network downtime. The intelligent infrastructure management system allows easy planning and detection of MAC's while maintaining accurate records for handling help desk tasks. The solution offers features that help to trace all devices connected to the network and in mapping and documentation of the ‘end-to-end' physical infrastructure.

It helps in monitoring all connections and events. The automatic log reports, alarms, and alerts generated by the system in case of changes and/ or disruptions in the network allow network managers to detect and trouble shoot problems much faster.

Concerns

Industry consensus that there is a need for a stable government. Paralyzed policies are a major concern which is not ensuring smooth economic activities in the country and better return on investments. India needs licensed technicians who can help to enhance the quality and performance.

OEMs ought to focus more on creating more awareness about performance, standardization, higher bandwidth capabilities, and good system integrators in the market. The market is impacted by the competition, pricing pressures, reliance on third party suppliers, and fluctuations in foreign currency exchange rates.

OEMS are facing tough times in meeting the price expectations vis-a-vis margins trade off. Further reduction in prices would be difficult for the players considering steep rise in dollar. Most of the OEMs are not based in India; as they import, thereby increasing the cost of material which ultimately results in higher cost of ownership. Several organizations are reducing capital expenses (capex).

Telecom is one of the strongest verticals for structured cabling market. But its contribution is relatively low. The government is also slowing down but not finalizing any decisions.

Liquidity has also impacted the industry. Industry consensus states that the whole supply chain is under pressure. There is a severe shortage of quality system integrators in the market.

The Sliver Lining

The industry anticipates a huge growth potential of the market in 2015. Calculated decision will help to take the industry ahead.
Industry dynamics is slowly changing as the technological needs are changing-there is more and more adoption of convergence, GPON, cloud computing, and others. UIDAI is boosting banking, it is in turn leading to expansion of banks and cabling vendors can get a pie out of it. State data centers, hospitality sector are on an expansion mode. There is an increase in fiber deployments. Digital content delivery, reliance on online applications and demand for broadband is expected to increase.

Increasing security requirements for sophisticated networks crave for intelligent networks which can locate and identify physical intrusion.

Collaboration via unified communications and video is also driving the cabling market to handle bandwidth hungry application.