HPE prepares for spicy affair with India to churn out $1B worth of servers

Middle Kingdom suddenly a less appealing destination for manufacturing

HPE is planning to start manufacturing some of its high-volume servers in India, with the aim of turning out $1 billion worth of kit in the next five years.

The IT infrastructure biz has linked up with Indian manufacturer VVDN Technologies to build HPE's products from that company's factory in Manesar, Haryana.

HPE says it intends to make circa $1 billion worth of servers in the first five years of production via its Indian contract manufacturer. Local operation will support the growing demand from customers in India but is also intended to strengthen and diversify HPE's global supply chain.

The company did not specify what it means by "high-volume servers" but this typically refers to 2U rack-mount x86 boxes such as HPE's ProLiant DL380 model.

"Today's announcement marks a significant milestone for HPE and reiterates our commitment to the Government of India's 'Make in India' initiative for a self-reliant India," HPE CEO Antonio Neri said, adding: "We are proud to build on our strong presence by establishing a manufacturing operation in this important country."

India's Minister for Railways, Communications, Electronics and Information Technology, Ashwini Vaishnaw, expects large-scale IT hardware manufacturing such as this to help broaden and deepen the manufacturing ecosystem.

HPE claims its workforce in India is the company's largest outside the United States, with its campus at Mahadevapura in Bengaluru (Bangalore) said to be home to many of HPE's worldwide product development resources.

HPE is not the only tech vendor looking to India as a new location to set up manufacturing capacity.

In May, Cisco announced it planned to start manufacturing some of its hardware in the country, although the network biz was similarly vague about what it was producing, talking about "best-in-class technology," and likewise thought this would drive over $1 billion in exports and domestic production over the next several years.

Taiwan-based Foxconn, which makes kit for Apple, announced late last year that it was investing $500 million to expand its manufacturing presence in India, and broke ground on a new factory in the state of Telangana in May.

US memory chipmaker Micron is also investing in a chip assembly and test facility in Gujarat, with construction expected to start in August and operations estimated to start by the end of 2024.

The common thread in all of this is seemingly that India may be benefiting from China's fall from grace as the world's favorite outsourcing destination, especially in light of the US's determination to clamp down on China's access to advanced technology for applications such as AI.

Earlier this year, HPE surprised many by announcing it was selling off its remaining share in China-based joint venture H3C despite professing itself pleased by growth in the Chinese market just a few months earlier. This may have had something to do with one of H3C's subsidiaries being added to the US government's Entity List.

However, subsidies may also be playing a role in some of the decisions to set up in India. The combined investment by Micron and Indian government in the Gujarat chip facility has been pegged at $2.75 billion, but Micron itself is only putting up $825 million of that, meaning the lion's share of the funding is coming from Indian taxpayers. ®

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