Smartphone, semiconductor manufacturers shift from China to India

India is fast emerging as a competitive destination for electronics manufacturers exiting China, with the world’s largest such manufacturer Foxconn entering a US$19.5 billion (S$27.9 billion) joint venture with India’s Vedanta Group to make semiconductors in the western state of Gujarat.

While China remains the global hub for electronics production, companies are looking for alternative locations after the country’s strict Covid-19 lockdowns disrupted production.

China’s political tensions with the United States have also led businesses to adopt a “China Plus One” strategy of diversifying supply chains from Asia’s biggest economy alone to countries such as Vietnam, Mexico and India.

Companies like Apple, Samsung and Google are taking small but firm steps towards India, enticed by new incentives for electronics production as well as the massive domestic smartphone market that is the second-largest in the world.

On Wednesday, the government announced that it would fund 50 percent of the project costs for a range of semiconductor fabrication plants. It also raised the fiscal support for compound semiconductors, packaging and other semiconductor facilities to 50 percent, from 30 percent earlier.

This is on top of 2.3 trillion rupees (S$40.4 billion) of initiatives unveiled in December 2021 to position India as a global hub for electronics system design and manufacturing. This includes a 760-billion-rupee push for a semiconductor and display manufacturing ecosystem.

At a recent press conference, Minister of State for Electronics & Technology Rajeev Chandrasekhar said that in “the post-Covid-19 world of shifting global value chains” for electronics, companies “look for viable, sustainable bases to manufacture products”.

“That is exactly what India delivers,” he added.

While home to many semiconductor research and development units owned by top global firms, India lacks large-scale semiconductor manufacturing facilities.

It has, however, seen significant growth in the wider electronic products industry, with its domestic production in electronics increasing from US$29 billion in 2014-15 to US$75 billion now.

Conglomerates such as the Reliance and Tata groups are keen to corner a greater share of this growing market as well as export electronic products through joint ventures with foreign partners.

India’s vast supply of reasonably cheap labor and its diversified industrial base are also attractive to global companies.

The Vedanta-Foxconn semiconductor and integrated display fabrication plants that will be set up over the next two years in Gujarat’s Ahmedabad district will employ 100,000 people. Oil and mining conglomerate Vedanta has a 60 percent stake in the pact with the Taiwanese electronics giant announced mid-September.

Backed by government incentives, mobile phone production more than doubled in value from April 2021 to March 2022, propelling India to become the world’s second-largest manufacturer with a total production worth more than 52.77 billion rupees.

Apple is expanding its iPhone production in India, where Taiwan’s Foxconn, Wistron and Pegatron are expected to contract manufacture 5-7 percent of all iPhones sold globally in 2022.

This is up from India’s 3 percent contribution in 2021 and under 1.5 percent in 2020. JP Morgan analysts estimate that Apple could expand this to 25 percent of all iPhones by 2025.

Over 95 percent of iPhones sold globally are made in China, but Apple has been reducing this since the pandemic.

Foxconn’s existing India units in Chennai began making Apple’s flagship iPhone 14 this year just six weeks behind China.

 

SOURCE: NEWS AGENCIES