Does India have what it takes to challenge China in electronics manufacturing?

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In the wake of COVID-19, it became clear to investors that the megalithic supply chain monopoly they were working with – China – had its limits. Relying on a single, distant source to manufacture and distribute virtually everything in our vital electronics market has started to look risky, and companies have increasingly looked for ways to make their supply chains more resilient and diverse. . Investors are seriously considering India as an alternative supply chain in this massive move - and one that is not being made simply on the basis of trade wars.

Whether India poses a reasonable risk to global electronics companies looking to relocate to a new electronics manufacturing hub remains to be seen.

Historically, the business environment in India has not been very conducive to this type of initiative. In purely economic terms, global players choose to work in simpler and easier areas; Over the past decade, India has not been characterized by a stable government that only focuses on investment. However, that has started to change over the last five or six years and it seems unlikely that he will return anytime soon. Let's take a look at some of the changes brought about by recent policy developments in the initial phase of India's transformation.

In 2016, India was the fifth largest manufacturer in the world, with a total manufacturing value added (MVA) of over $420 billion. Manufacturing in India has been growing at 7% annually and constitutes 16-20% of its total GDP. With its rapidly growing economy and population of 1.4 billion, making it the second largest and youngest country in the world demographically, India has almost unprecedented consumer demand , and with it, a growing demand for manufacturing on its own soil.

To this end, there are several sectors, including automobile manufacturing, in which India is already self-sufficient. Almost all car brands in India sell vehicles that are manufactured, assembled and sold in India. In terms of demand, Indians have an insatiable appetite for two things: gold and electronics – and especially in electronics, they want the latest and greatest. As a result, you will find more electronics brands in India than in the US - India is home to American, German, Korean, Chinese and even Turkish brands. But to reach even a fraction of the scale of China, India will need to become a hub for manufacturing and exporting electronics globally.

Over the past six years, the Indian government has actively sought to attract foreign investment and develop the country's manufacturing economy. With the "Make in India" initiative of 2014 and an infrastructure revival in 2017 aimed at creating a more connected economy, they first focused on the areas most critical for the Indian market: mobile phones and televisions . As a result, they have created incentives for these two industries at the national and state levels.

India mobile phone imports and exports.

And the major phone manufacturers responded: they asked how to create an ecosystem and what was the most relevant market. Since most Indians discover the internet on their mobile phones, with the cheapest data costs in the world, India seemed like the way to go.

So the Indian government grabbed this horse and bet their house on it, determined to make it a success. They persuaded Samsung and Apple to manufacture phones in India. Initial consumption was massive: within two years, 100% of Indian-made phones were used in India, leading to a drop in imports. Since then, Apple and Samsung have started exporting out of India, to the tune of 70 to 100