'We are changing gears and leveraging the Make in India policy'

Thales India, part of the Thales Group - one of the world's largest defence suppliers - is betting big on India along with China and the US. Of late, Thales has acquired a few companies in the digital space to expand in data analytics and cybersecurity. Patrice Caine, Chairman and CEO of the Thales Group, speaks to Business Today's Prosenjit Datta and Manu Kaushik on the next big areas and what makes India attractive. Edited excerpts:

By Prosenjit Datta & Manu Kaushik  
Monday, August 6, 2018

Is Thales a government company? The French government owns 26 per cent in it.

Patrice caine: We are privately listed on the Paris Stock Exchange. We have two large shareholders, but they do not own Thales. Dassault owns 25 per cent and the French state 26 per cent.

Your electronics are at the heart of most of the systems. In defence, do you work directly with armed forces or contractors of armed forces?

Both. We are in five domains. Defence is 50 per cent and civil is 50 per cent. We have many civil customers such as airlines, satellite operators and transport operators; we do signalling, communications and supervision systems for 80 metros in 40 cities. This is apart from big corporates in security and cybersecurity. In defence, typically, when we sell military satellites, we deal directly with ministries of defence. When we are onboard a strategic platform, be it Rafale or any ship or submarine platform, we go through clients.

Where do you see growth in India?

We enjoy a favourable positioning in the five markets where we are positioned - defence, aeronautics, space, security and ground transportation. Ground transportation needs are immense in India and we can provide state-of-the-art signalling systems. Many new metros are coming up in India. Defence is booming everywhere. We are seeing more and more cyberattacks everywhere. We are well-positioned in all these markets. We are growing substantially in India.

Recently, you took over cybersecurity firm Gemalto. Is the integration complete?

We need different authorisations, particularly related to anti-trust. The closing is foreseen in the second semester of this year. We don't expect surprises. The acquisition of Gemalto, and it was the case when we acquired Guavus too, is part of our development strategy in India. We have 600 people in India. We have been present in India for 65 years, but now we are changing gears and leveraging the Make in India policy. Gemalto in India has 900 people. So, we will have 1,500 people. We are also going to open an engineering R&D centre, not only to serve the Indian market or product lines but also to cater to export markets. India is a fantastic hub in terms of competitiveness when we talk about the supply chain. It's an innovative country with a lot of skilled engineers. That's why we have decided to open an engineering R&D centre here.

You have talked about India being one of your three thrust markets.

The top three markets are the US, China and India. In India, the market is immense. It is also a source of competitiveness in supply chain when we deal with Indian suppliers/partners. Thirdly, it's also a country where you find competent engineers, as R&D is at the heart of what we do. Out of 65,000 people in Thales, 25,000 are in R&D. You can say that Thales is a huge laboratory. That's why being in countries with highly qualified engineers is extremely important to us. We foresee Thales employing 5,000 people in the next three years in India.

You have spoken about moving your supply chain from Europe to India. What are the benefits? Do you plan to make India-specific products?

We are not moving our supply chain to India but developing our global supply chain thanks to the Indian competitive and competent ecosystem. In our domain, price is one element. As we are doing complex products and solutions, the quality of the supply chain is important. We are growing our supply base here. This year, the Indian supply chain will be close to 100 million Euro. In three years, we will double this. We have Indian partners and joint ventures, in particular in defence, where it is a must. We have successful joint ventures with BEL, Samtel and have recently formed one with Reliance Defence. So, we are also used to working with Indian partners in joint ventures to address typical defence markets.

You take a 26 per cent stake in Indian joint ventures. Is it the policy?

It's 26 per cent by policy, but now we are authorised to go further. It's our ambition to increase share in JVs.

Tell us more about cybersecurity. You are also doing a lot of work in data analytics and AI.

Thales was seen as a defence electronics company. We have both defence and civil. Electronics is the emerged part of the iceberg. When you look at what we sell, 80 per cent of the value added is system and software. Then, this added value is hosted in electronic components, modules and equipment. If you look at our 25,000 people in R&D, 3,000 are dedicated to R&T. One of them, Albert Fert, won the Nobel Prize in 2007. Let's put aside these 3,000 people who are doing fundamental research. Of the remaining 22,000 R&D people, 17,000 are in system and software. Only 5,000 are in other disciplines - optics, mechanics, etc.

Thales is digital by nature. It was not seen as digital. Looking forward, I decided, three years ago, to invest even more in four disciplines that are critical for what we do. These are connectivity, data analytics, artificial intelligence and cybersecurity. In fact, data analytics is a direct consequence of our previous technological evolution as we have always been involved in sensors - radar and sonars. These sensors have progressively moved from analogue to digital. For us, it was obvious that we would take care of the data generated by these digital sensors.

People speak of machine learning, but it's just one of them. Artificial intelligence is a set of technologies, supposed to give two things to what we do - a self-learning capability and autonomy to sensors to take decisions, keeping the man in the loop.

The fourth is a direct consequence of the first three. Once you connect more and more objects, you generate massive data, and you compute this data to produce more intelligence and give autonomy to the sensors. It has become of vital importance to guarantee the integrity of data, algorithm and computers on which you process this data. This is cybersecurity. In these four disciplines, we have invested close to 7 billion Euro over the past three years - 6 billion Euro to acquire Gemalto and 1 billion Euro to invest in digital R&D and acquire several companies, such as Guavus, a data analytics company. If we zoom in on cybersecurity, we do technologies that are useful for sensors and systems that we do for airlines, air traffic controllers, and so on and so forth. This will generate 1 billion Euro in turnover. It is now key, if not mandatory, to be cyber-resilient as all our systems are safety critical.

Do you provide cybersecurity solutions to clients in just the five verticals where you operate?

We do business with many customers outside these five verticals. We have 19 out of the top 20 banks in the world as our customers. We sell these solutions to healthcare and retail industries also.

You have spoken about trebling India revenues in the next three years. What would be the break-up between the government and the private sector?

Currently, our business is big-half in defence and small-half in civil. Probably, the mix would be the same in the years to come.

You have been in India since 1953 and helped set up Bharat Electronics. What has been the biggest change your company has seen in India in the last four-five years?

We had started as Thomson-CSF, the ancestor of Thales. Progressively, we decided to be present in India and not only to sell in India. The pace of change here is impressive.

You have talked about dealing directly with airlines like IndiGo and Jet Airways in India. What kind of solutions do you provide?

We are one of the world's leading avionics providers. We are onboard an aircraft when an Airbus is sold to these airlines. We address these airlines directly to provide IFE (in-flight entertainment) systems and connectivity (passenger connectivity). We see a market evolution where we can serve IFE and connectivity needs at the same time. To do so, we leverage our expertise in satellite communications.

The Indian government recently allowed airlines to provide broadband connectivity onboard. Are you looking at this as an opportunity?

Absolutely. In the US, for instance, we have done almost the full chain - satellite dedicated to aero connectivity, the IFE system, the service, and we have partnered with SES, one of the world's leading satellite operators, to provide end-to-end services to airlines. In India, thanks to the new policy, this market is interesting for us.

What kind of work you are doing in the space domain in India?

It is more international scientific cooperation along with the French space agency. But again, ambitions are high, and we think we can accomplish this ambition by partnering in India.

@ProsaicView, @manukaushik

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