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

Chennai has been ranked as the cheapest location among the top 100 electronics R&D FDI destinations according to the latest assessment using the fDi Benchmark, a Financial Times investment location comparison tool.

Chennai has an estimated annual operating cost of $1.24 million for a 50-person R&D center, which is the cheapest in the world. The Malaysian city of Penang took second place 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 most competitive locations in the world, only after Seoul, which is home to major corporate campuses 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 localization competitiveness benchmark is based on the cost and quality of R&D activities in electronics.

This gives 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 the manufacturing sector, the presence of a large R&D center is lacking, according to a report by Hindu Business Line.

The government of Tamil Nadu is making efforts to attract more investors in the electronics sector and plans to hold a global investor meeting in 2023. According to a report by Business Standard, the state has seen an investment of $50 billion through MoUs since 2019.

Pooja Kulkarni, MD and CEO, Guidance Tamil Nadu reacted to the report saying that the presence of the best institutions of higher learning 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 covering all areas.

The state government plans to announce an R&D policy soon. Emphasis will be placed on the efficient use of state human resources, said Industry Secretary S. Krishnan.

Chennai currently produces nearly 20% of Indian electronics. The State Electronic Equipment Manufacturing Policy 2020 aims to raise the output of the electronics industry to $100 billion and increase the export contribution to 25%.

India is expected to attract $120 billion to $160 billion in FDI investment annually by 2025, according to a CII-EY report. India ranks third in terms of attractiveness and more than 80% of foreign investors plan to invest in India in the next 2-3 years, according to a report by The Economic Times.

According to the Institute for Management Development (IMD), the evolution of government effectiveness in India is the result of relatively stable public finances (despite the challenges induced by COVID-19), the feeling of optimism among Indian business actors and government funding and subsidies for private companies.

(Edited by : Shoma Bhattacharjee)

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