The plant will be located in the 300-acre Sriperumbudur Hi-tech Special Economic Zone, near Chennai, being developed by Motorola and the Tamil Nadu government.

The company signed an MOU with the state government of Tamil Nadu on June 7, 2006, to this effect.

The Motorola plant will come up in 70-acre land and the balance will be for other component vendors. The first phase of the project would come up on 2.50-lakh square feet at an investment of $30 million by January 2007.

According to Stu Reed, executive vice president, integrated supply chain, the plant will make all the models of cell phone models made by the company. "The plant capacity will be 1 million phones per month." Declining to mention the price at which the land is bought from the state government he said, "At this juncture it is not possible to tell the land usage schedule."

Targetting the Indian masses, Motorola will focus on producing sub-$30 handsets at its Indian plant. "Our strategy is to connect the unconnected and hence we will make the phones for the masses." According to him, Motorola has sub-$30 handsets in its portfolio.

The union minister for telecom and IT Dayanidhi Maran, said, "Motorola's plans of making cheaper handsets goes well with the government of India's plans for rural connectivity." According to him the country sees an addition of five million new subscribers every month.

Speaking about the company's pricing policy Reed said, "The handset pricing will be based on the Indian manufacturing costs. The pricing will not be on the basis of global pricing policy."

On the pricing front, Motorola's advantage over its competitors who have set up manufacturing facilities in India lies in the fact that a major portion of the software needed for the its handsets is developed by Motorola's research and development centres in India.

"Nearly 40 per cent of the software needed for the Motorola's handsets are developed in India," said Padmasree Warrior, executive vice president, chief technology officer. (See: Motorola's Chennai-born lady CTO)

Apart from the fiscal incentives and the fact that major component vendors like Flextronics and FoxCon have decided to set up shop near Chennai, Reed said Motorola decided on Sriperumbudur because of the availability of technical manpower. In the first phase of the project the company will hire around 3,000 people and increase the headcount to 7,000 when the project is fully completed.

According to Firdose Vandrevala, chairman, Motorola India, and corporate vice president, Motorola Inc, with this facility the company would be coming full circle in leveraging India's intrinsic advantages viz., IT skills, scientific talent, competent workforce and economies of scale.

When questioned about the company's vendor development programme in India, Reed said, "It all depends on the model and its position in the product life cycle. The volumes would entice the component vendors to set up base here."

After catering to the domestic market the company would export handsets to Middle East, South East Asia and Africa. The Indian plant would make handsets for Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA) technologies. According to Reed the Indian plant will not replace any of Motorola's production capacity elsewhere in the globe.

Motorola's move to set up base comes at an interesting juncture. Only recently Nokia inaugurated its $150-million plant. The Nokia brand commands a major market share in the Indian handset market. The Korean group LG is the other cell phone maker in India while Samsung India has announced its plans to set its production facility near New Delhi. Others who have a production base in India are Elcoteq and XL Telecom.