China’s Lockdown Restrictions, Anti-China Sentiments Forcing Global Firms to Shift its Manufacturing Base in India

Published  September 26, 2022   0
S Staff

Although China still remains the leader in electronics manufacturing and an international hub, the recent lockdowns due to coronavirus has disrupted the production

The COVID-19 pandemic that sparked anti-China sentiments in various parts of the world has helped India to become globally competitive in electronics manufacturing. The success also turned to reality due to the various schemes and incentive packages such as PLI, SPECS, MSIPs etc unleashed by the government. For example, one of the world’s largest contract manufacturers Foxconn has now signed a pact with Indian business magnate Vedanta to manufacture semiconductor in Gujarat. 

Although China still remains the leader in electronics manufacturing and an international hub, the recent lockdowns due to coronavirus has disrupted the production. This has forced the global firms to look out for an alternate base for manufacturing such as India. Moreover, the ongoing trade scuffle between the US and China has made businesses embrace the “China Plus One” strategy of diversifying supply chains from China to other countries such as Mexico, Vietnam, and India. 

The Global firms like Google, Apple, and Samsung are taking imperative steps towards India to boost the industrial growth backed by important incentives for the manufacturing of electronics as well as the colossal in-house smartphone market, which is now the second-biggest in the world. A couple of days back, the government carried out some changes in the PLI scheme and proclaimed to offer 50 percent of the venture cost for a wide-range of semiconductor fabrication plants. Also, the financial assistance for compound semiconductors has been raised along with designing and other semiconductor facilities to 50 percent from 30 the previous 30 percent. 

Apart from that an amount of 2.3 trillion rupees (S$40.4 billion) of initiatives has been unleashed back in December 2021 to help India turn into an international hub for electronics manufacturing and system design. The initiatives comprises a 760-billion-rupee push solely for display and semiconductor manufacturing ecosystem. In an interaction with The Sunday Times, Minister of State for Electronics & Technology Rajeev Chandrasekhar said, "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."

According to some media reports, the Cupertino tech giant is expanding its production of iPhones in India, whereas Taiwan headquartered Foxconn, Pagatron, and Wistron are speculated to contract manufacture 5-7 percent of all iPhones sold internationally in 2022. It is an escalation of 3 percent contribution back in 2021 and under 1.5 percent in 2020. The research associates of JP Morgan mentioned that Apple has the higher chance of expanding this to 25 percent of all iPhones by 2025. In fact, the Foxconn unit in Chennai commenced manufacturing Apple’s latest iPhone 14 this year within just six weeks behind China.