Is India Destination Next For The Smartphone Manufacturing Market?

Global players in the smartphone and electronics manufacturing industry have been slowly moving away from China post pandemic. This was triggered by Covid disruptions and political tensions.

Where is their next destination to set up shop? India. By the end of 2022, almost 16% of the 1.25 billion globally exported new smartphone units were manufactured in India. By the end of 2023, this number is projected to be at 19%, as per Counterpoint Technology Market Research.

Most recently, Taiwanese manufacturer Foxconn, responsible for manufacturing 70% of global iPhone units, opened a manufacturing facility in Hyderabad on Monday, and has also purchased a 300-acre property in Bengaluru.

Apple's top suppliers such as Foxconn, Salcomp and Pegatron have also been on a hiring spree as they look to ramp up operations. Samsung announced in March that it would invest in setting up smart manufacturing capabilities at its second largest mobile phone plant in Noida. On a more local front, the Tata Group has started manufacturing iPhones at a Bengaluru facility, as per reports.

Apple CEO Tim Cook had reportedly said during an earning call in February, "India is a hugely exciting market for us and is a major focus."

Why India?

A large potential market and labour cost advantages are among the reasons why Foxconn hopes to continue expanding in India, chairman Young Liu has said.

Neil Shah, Vice President of Research at Counterpoint Technology Market Research, told The Core that the most attractive part about India is that it has an English speaking population and a young population, both advantages that China does not have.

India also boasts of a large pool of engineering talent, and the cost of labour is cheaper.

Shah said that after the Make in India initiative was launched in 2014, 99% of smartphone - that contribute to the majority of consumer electronics in India - were being manufactured in India itself.

The shift of Apple focus towards India was also marked by the opening of two Apple stores in the country – one in Delhi and another in Mumbai.

Apple has already been assembling several iPhone models in India and first started manufacturing from the country in 2017 with the SE model.

It started with just assembly, and now we've moved to high-level manufacturing which requires advanced machining, said Shah. Because of that, we're seeing a huge ecosystem being developed around this, with different suppliers from Taiwan, China and homegrown EMS players, he said, adding that the government pushing Make in India with different policies is a huge catalyst.

But…

Despite a promising surge, there are still some challenges that India needs to address. Foxconn's Liu said that language, culture, manufacturing capabilities and supply chain completeness are the few challenges they are prepared to face. When it comes to semiconductors (the Vedanta-Foxconn joint venture is set to get a green light from the government), Taiwanese business officials said that India may not be ready, despite government incentives, given unreliable power, culture shocks and hassles with single window clearances.