The Make in India programme was launched by the Modi government just a few months after coming to power. Given the large population base and low per capita income, the country could become an ideal destination for manufacturing but the regulatory cholesterol, stigmatized capitalistic policies of the government was hampering the growth of manufacturing. Now the positive response by the government and woes in the manufacturing giant China is helping ‘Make in India’ grow. Last month Samsung opened the world’s largest mobile manufacturing plant in Noida to produce 120 million phones per year. Apple has also started the production of iPhone 6S Plus in Bangalore. Foxconn, the Taiwanese manufacturing giant has also signed an agreement with the state government of Maharashtra, Uttar Pradesh, and Haryana to invest five billion dollars in India. Acer’s spin-off manufacturing arm Wistron announced agreements with Indian government officials to rent land for local production purposes.
It is not just the global manufacturers who are moving to India, the Indian mobile manufacturers who usually used to import most of the components from Chinese companies are also changing its course. Domestic players like Lava, Intex, and Micromax have started production units in India to meet their demands because the import from China is costly and time consuming. Even the Chinese manufacturers Xiaomi, Oppo, Lenovo, and Vivo which compete with Indian companies in the low-cost Android phone market have started to manufacture in India. The reason behind this is that the rising per capita income and prosperity in China has increased very rapidly. The Chinese companies find it more efficient to manufacture in India.
There are a few more important reasons behind the slowdown in Chinese Smartphone manufacturing-
The Chinese Smartphone market has saturated so there is a slowdown in the domestic market. On the other hand, the Smartphone penetration in India is still at 30 percent. The youth populations rising income will push the Smartphone demand in the country, so most of the Smartphone companies wants to setup the manufacturing units in India before their competitors do so because this will give them an edge in tapping the domestic market. Another reason behind the Smartphone companies moving to India from China is the rising land and labor prices in the pre-eminent global manufacturing destination. So Chinese Smartphone makers find themselves in a position where they need to make cheap smartphones as all of their costs are rising.
The Electronic manufacturer, Samsung, Toshiba, Panasonic, and Sony are considering cuts in their investment in China and set up factories in India. So the woes of Chinese manufacturing is not limited to Smartphone companies, it is widespread across all the sectors. As Trump’s ‘Made in America’ rhetoric translates into action, further woes to manufacturing in China is expected. But one thing India should keep in mind that it has to focus more on land and labor reforms if it wants to take advantage of the big manufacturing move over from China.