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July 18, 1997



HP diverts $400 m factory plan from India to China, Malaysia.

Hewlett Packard, the $38.4-billion infotech company, has rejected the proposal formulated by its Indian subsidiary for setting up a $400-million manufacturing unit in India and has, instead, shortlisted China and Malaysia for the same project.

The California-based IT major will soon be choosing between Shanghai in China and Pennang in Malaysia to finally put up the manufacturing unit for the 'inkjet pen', a high-tech component in non-impact printers, with an investment of $400 million.

One of the main reasons cited for not setting up the unit in India is the poor infrastructure and various bottlenecks restricting timely import of raw materials and export of finished products.

Suresh Rajpal, president, HP (India) Limited, has confirmed this and said: "We had evaluated the proposal of setting up the inkjet pen manufacturing facility in India involving sizeable investments but have lost the project to China or Penang. It is difficult for us to market India as a viable destination for investments if it takes 45 minutes to cover a distance of 5 kilometres in a software priority zone like Bangalore. The challenge in India is the logistics of shipping things out of the ports."

This project, according to Rajpal, was aimed at increasing the export base from India and would have been the largest investment by a single company in the Indian electronics and computer sector.

Hewlett Packard (India), at present, has a software development company in Banglaore involved in 100 per cent export of software. A separate international procurement office has also been established by HP (India) for outsourcing plastic, carriage assembly and other components required for printers and computers to destinations like Spain, Barcelona and Singapore.

Elaborating on the reasons for opting China or Malaysia instead of India, Rajpal said: "The basic reason behind this decision is the fact that India does not have a single port which can facilitate shipments of products within four hours after the manufacturing process is complete. We do not mind tolerating one day of delay but four to five days are not acceptable."

The HP (India) president also pointed out that the margins in the IT sector have been shrinking worldwide.

"If we are to hold an inventory worth of $100 million for additional four to five days the net profit, which are in the range of 4 to 5 per cent worldwide, will be completely wiped off," said Rajpal.

- Compiled from the Indian media

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