Jody Gallagher, President and Chief Executive Officer, AFL
India has evolved as a digitally advanced market. It is growing rapidly. Multinational companies are building hyperscale data centers. Investments from some customers are expected to be in excess of 20 percent annual growth.
Accelerated by the government’s Make in India, Smart Cities, and Digital India initiatives, more and more online transactions are expected to take place, and more data centers will be required. Also with the GST implementation, small- and medium-entrepreneurs will streamline their respective businesses. They will not have their own IT department, and will focus on cloud computing, whereby the cloud service providers will need to adopt hyper-scale data centers. We see a huge potential for data centers in the country.
AFL is looking to manufacture products at its Bengaluru facility for North American and other Asian markets. We are accomplishing this by partnering with Citadel Intelligent Systems, which will provide the manufacturing excellence, sales, and marketing support. We will initially, primarily produce equipment designed for data centers for existing and new customers. Citadel has a team of people
with experience in fiber optics, and knowledge of the Indian market and Indian customers. It provides us an excellent opportunity to accelerate our progress and success.
This strategic partnership will bring many robust fiber distribution and cable management solutions to India, including the latest fiber cable designs that address the growing innovation required to manage significant high fiber count applications within data centers. The partnership will provide customized fiber optic solutions for hyperscale and data center markets and harsh environments. We believe that our partnership with CIS will open new avenues for us, help in tapping new customer segments, and remain competitive in the business.
No doubt, today India is a relatively small piece of our business; it is less than 5 percent of our turnover. We believe this is the right time to invest locally in India. Being one of the leading providers in the hyper-scale data centers market globally, our main line business for India also will be optical cabling and optical infrastructure, that goes inside the racks and cabinet and the framework, that have to be connected with optics. And in the next 3–5 years we expect to be a leading provider for products and solutions in this market.
As recent studies suggest, the sector will reach a USD 2 billion revenue mark by 2019. AFL aims to address one-fifth of this market – USD 500 million – with its data center focus. To be synchronized with this, our collaboration aims at establishing a world class organization that can support existing global clients of AFL in India as well as the incredible demand for innovation within the Indian data center customers.
AFL is a wholly owned subsidiary of the USD 7 billion Fujikura Ltd. of Japan. AFL has been in business since 31 years, with an annual turnover in excess of USD 1 billion, equally contributed by telecom, enterprise, and energy, major markets being the Americas, Europe, and parts of Asia.
Our other products include fiber optic cable and hardware, transmission and substation accessories, outside plant equipment, connectivity, test and inspection equipment, fusion splicers and training. The rising demand for high-speed broadband, increased investment in IT and telecommunications, are scaling up exponential growth for the optical fiber solutions in the country.
The global OFC market today has a very tight supply, with about 500 billion fkm. AFL has an approximate 10 percent share and is growing in excess of 10 percent per year. By next year, I think the Indian market should overtake the European market in demand and share second position with the US market, after China. This increased demand in India, backed by the distance demographics, and the large population will drive a significant amount of investment in optical infrastructure. At the moment most of its requirement is imported, with a long lead-time, inefficient procurement where costs are high.
We believe it is a good time to invest in India and the initial investment is expected to grow significantly in the next 3 years. With that intelligence, localization plan, and manufacturing plan we are moving ahead in the market.