Can India replace China as the world's factory?

[Looper]

Last week, Apple announced plans to make its latest phone model - iPhone 14 - in India, a significant milestone in the company's strategy to diversify manufacturing outside of China.

Five percent of iPhone 14 production is expected to shift to the country this year, much sooner than analysts had anticipated.

By 2025, a quarter of all iPhones the company makes could be produced in India, say analysts at investment bank JP Morgan.

Apple has been manufacturing iPhones in the southern Indian state of Tamil Nadu since 2017.

But the decision to make their flagship model in India is a noteworthy step as trade tensions between Beijing and Washington show no signs of letting up.

The move also assumes significance in the backdrop of the global supply chain "de-risking" which is underway because of China's "zero-Covid" policy.
Apple businessImage source, Getty Images
Image caption,
Apple has been manufacturing iPhones in the southern Indian state of Tamil Nadu since 2017
'China plus one'

Beijing's hard-line approach to eradicating the pandemic has led to industrial lockouts and large-scale supply chain disruptions

As a result, global firms are increasingly adopting a "plus one" strategy - or avoiding investing in China alone - to re-orient their supply chains.

"Companies are no longer willing to sit and wait for a policy change in China, or put their eggs in one basket for their sourcing needs," Oscar De Bok, CEO of logistics company DHL's supply chain business, told the BBC.

"They want to make sure they have two or three alternatives," said Mr De Bok, adding that this trend towards "omni-sourcing" had clear beneficiaries in countries like India, Vietnam and Mexico.

Mr De Bok was in India's financial capital Mumbai to announce a €500mn ($49mn; £43mn) investment to double DHL's warehousing capacity and headcount in the next five years.

He said this commitment was driven, in part, by the growth of foreign investment in sectors such as manufacturing and electronics where Prime Minister Narendra Modi's government has been offering financial incentives to companies that are keen on making India their production hub.

As part of this production-linked incentives (PLI) scheme, mining conglomerate Vedanta Resources has also earmarked investments of close to $20bn (£17bn) to set up a semiconductor plant in India in collaboration with the Taiwanese electronics manufacturing giant Foxconn.

Anil Agarwal, Chairman of Vedanta Resources, said last month that the world was looking to adopt a "China plus one" strategy and that "India is clearly in a sweet spot".
Advantage India

India, which is Asia's third largest economy, has been working hard to position itself as an attractive manufacturing and exports hub for multinationals.

It has a large domestic market and plentiful low-cost talent.

With GDP growth in the range of 6-7%, and headline inflation that's more modest than in many other parts of the world, India has been one of the better-performing major economies this year.

Its merchandise exports crossed the $400bn mark after stagnating at the $300bn ballpark for nearly a decade.
Apple businessImage source, Getty Images
Image caption,
Asia has a surplus of low-cost talent

Besides fiscal sops, Mr Modi's administration has also been giving a major push to bilateral trade pacts in a bid to integrate India more deeply into global supply chains and rejig its image as a notoriously slow negotiating partner.

Businesses have welcomed these initiatives.

But India's approach to trade liberalisation, experts say, has been one step forward three steps back.

The rush to sign free trade agreements to improve market access and reduce tariffs has been accompanied by rallying cries of self-reliance and duties going up on at least 3,000 items, many of them on critical inputs in manufacturing processes.

Privately, many foreign companies also complain about the lack of a level playing field and growing protectionism.

Small and medium-sized companies - the backbone of India's economy - continue to find it hard to navigate India's byzantine bureaucracy. Truly disruptive reforms on land acquisition and quicker licensing have been elusive, experts say. And rickety infrastructure remains a major sticking point.

"Apple is certainly a success story so far but making India a manufacturing hub will require not just big-ticket headline grabbing investments but also a supportive ecosystem for SMEs [Small and Medium Enterprises]," says Mihir Sharma, director at the Observer Research Foundation (ORF).

"It is too early to tell if all these investments will be made at scale, and whether they will be sustainable over time."
Apple businessImage source, Getty Images
Image caption,
Small and medium-sized enterprises are the backbone of India's economy

Mr Sharma says SMEs - which employ a bulk of India's workforce - have been largely left out of Mr Modi's fiscal incentives scheme.

According to ORF, barring textiles and apparel, the scheme doesn't cover other labour-intensive manufacturing industries which could enable India to meaningfully leverage the plus-one strategy of export-led growth and create jobs for the 12mn Indians joining the workforce every year.

Mr Sharma adds that India will need to upskill its workforce and create "a more welcoming business climate" to be able to compete with other Asian economies.

Thailand, Vietnam and South Korea - all stand significantly above India in the World Bank's Ease of Doing Business rankings. Vietnam has also created a 2030 master plan to build an integrated infrastructure corridor critical for mass manufacturing.
Tipping point

But despite these timeworn challenges, India is in a better position than ever before to leverage this "historic opportunity", says Alex Capri, Research Fellow at the Hinrich Foundation.

He says that certain "key concentrated nodes" in India - southern states such as Tamil Nadu, Telangana, and the National Capital Region in the north - are well poised to develop a critical mass in manufacturing, as the US and its allies decouple from China.

This is likely to unleash an era of competitive federalism among the states.

India could also benefit from Taiwanese tech companies moving capacity to the country under "friend-shoring" arrangements to take advantage of the easy availability of cheap talent, Mr Capri adds.

So is this a tipping point?

"One of my Indian friends told me, India never misses an opportunity..... to miss an opportunity. But I think this time it is different," Mr Capri says.

iPhone 14: Can India replace China as the world'''s factory? - BBC News

[david44]

They certainly lead in nose and earings made in Engineering works.

I think like here the wobblers are held back by a widespread belief in reincarnation so seldom as motivated as the Chinese who love Gold and want it now.

If we look at really well off places if only for the natives they seem to be small Monaco , Brunei, Singapore, Qatar, Switzerland, UAE, Kuwait ,Andorra, Leichtenstein, Norway and Iceland all outside NATO and EU

[Switch]

Norway has been a member of NATO since 1949.

It also hold faux membership of the EU.

[harrybarracuda]

What's the betting you're going to get pages of shit posted by hoohoo from the "Global Times" or some other chinky propaganda wankfest?

[panama hat]

all outside NATO and EU

Six of those are untouchable because of NATO and the others are vulnerable if anyone decides to vent their dislike as we recently saw with Malaysia cutting chicken exports to Singapore who panicked big time as they import close to 100% of everything.


Of course India could replace China, so could Indonesia and a few others. Added to which it isn't a matter of only one country 'replacing' China.

[sabang]

Replace, given the massive size of the Chinese market, and the competitive benefits conferred by having the huge assets and human capital already established and operating there? Highly doubtful.

Complement, and compete? Absolutely.

[Norton]

Replace, given the massive size of the Chinese market, and the competitive benefits conferred by having the huge assets and human capital already established and operating there? Highly doubtful.

Complement, and compete? Absolutely.

Very doubtful and certainly not in my lifetime.
While GDP is an indicator of economic geopolitical power, imo per capita GDP is far more important to a nations citizens. China is improving this but still a long way to go. India way behind and needs to do far more.

List of countries by GDP (nominal) per capita - Wikipedia

[panama hat]

Highly doubtful.

Other products are manufactured elsewhere and imported into China. (until they figure out how to copy them . . . badly)

You seem to think Chinese love and prefer China-made goods . . . they don't, as you'd know if you knew the place.


China can be replaced for manufacturing, but not by one country. Already Vietnam, Bangladesh, Indonesia, India etc have taken up manufacturing that was previously done in China.

[sabang]

This is a good thing actually. But, to state the obvious, the Chinese Space station and Huawei 5G networks were not made in sweatshops.

I am well aware of the Chinese proclivity for imported stuff, especially consumer goods like fashion and cars "if you can afford them". China is by far the World's largest market for those ridiculous fashion houses, basically it keeps them afloat.

[panama hat]

the Chinese Space station and Huawei 5G networks were not made in sweatshops.

Yet again you swerve off the topic like a defective boomerang . . . and yes, the technology was stolen.

I am well aware of the Chinese proclivity for imported stuff, especially consumer goods like fashion and cars "if you can afford them".

Nope, basic things like sticky rice, chocolate, Levis etc ad infinitum. If it's foreign, it's good' is the mantra - nothing chnaged fro eastern Europe during the Soviet era. Same shit, wealthier customers.

China is by far the World's largest market for those ridiculous fashion houses,

You call them ridiculous, I'd like to see how you dress . . . but aside from that do you have any numbers for this 'by far' dominance?

basically it keeps them afloat.

Except it doesn't . . . added to which, they've existed a long time before and will continue to exist a long time after Communist rule in China.

You vastly overvalue the place

[Norton]

do you have any numbers for this 'by far' dominance?

Not quite "dominate" yet but damn close. Still a very big market which luxury goods suppliers would really be hurt if China's consumption had big decrease.

Leading personal luxury goods markets by country worldwide 2020 | Statista

[harrybarracuda]

Oh there's no doubt the chinkies spend lots of their ill gotten gains on luxury goods.

I have no idea what PH is trying to get at.

Staff at Harrods started training to speak chinky years ago.

[sabang]

It's funny really- places like China and Russia you just love to berate, yet their affluenza have this outsized appetite for western luxury goods. In a pathetic attempt to bring this thread back on track, what about the Indians I wonder? Do they all want to look like Gandhi and Mother Theresa?

[bsnub]

yet their affluenza have this outsized appetite for western luxury goods.

According to Norts chart above, China is far from keeping the fashion houses afloat. If any country would be worthy of such an absurd comment, it would be the United States, which is by far and away the largest consumer of the luxury houses brands. Russia is not even on the chart.

So more bollocks from you as usual.

[misskit]

Perhaps the Chinese sabang saw in designer clothing were wearing the knock-offs.

[DrWilly]

Or perhaps he was just making up shit, again.

[panama hat]

Not quite "dominate" yet but damn close. Still a very big market which luxury goods suppliers would really be hurt if China's consumption had big decrease.

No argument there . . . more millionaires than the population of New Zealand.

I have no idea what PH is trying to get at.

That the world will not end if China ceases to buy certain things. Simple.

places like China and Russia you just love to berate

Oddly enough I don't berate them for buying Tag Heuer . . . rather I berate them for being the murderous scum they are. Oddly enough, you don't do the same.

yet their affluenza have this outsized appetite for western luxury goods

Good for them.

In a pathetic attempt to bring this thread back on track, what about the Indians I wonder? Do they all want to look like Gandhi and Mother Theresa?

You call that an attempt at bringing the thread back on course? You're now an expert on India and Indians . . . because you ate a curry somewhere in Adelaide?


If India takes over some of the manufacturing of western companies they would create a bigger middle class . . . see China as an example. Why would that be a bad thing? Added to which, they speak English.

[OhOh]

imo per capita GDP is far more important to a nations citizens.

More important is, GDP per capita PPP.

[DrWilly]

yet their affluenza have this outsized appetite for western luxury goods.

You might want to check your word use there...

[harrybarracuda]

It's funny really- places like China and Russia you just love to berate, yet their affluenza have this outsized appetite for western luxury goods. In a pathetic attempt to bring this thread back on track, what about the Indians I wonder? Do they all want to look like Gandhi and Mother Theresa?

You imbecile, do you think every Chinky shops at Harrods and owns a Rolls?

[Switch]

Birth rates and fertility is declining everywhere. Economically, China has grown too fast, even by their own metrics.
The big difference is that India has a variety of religious competition, and China insists it has none. India has more poverty and a very sluggish attitude to trade. China is stronger because they eat more investment, but the Indian workforce is still struggling to escape poverty.

If only XI hadn’t spent all the country’s financial and personnel capital on a very silly Covid policy?

India by virtue of its religious variety and poor people, will overtake China.

Because India is slower, and has more really poor people, China will lose.

[sabang]

Perhaps the Chinese sabang saw in designer clothing were wearing the knock-offs.

Perhaps, but a chart showing us the size of the brands that make fashion apparel does not tell us where it is sold- ie the market size. It is a non sequitur. The domestic Chinese luxury fashion industry is tiny, a fledgling compared to behemoths like the USA & France- albeit growing. The vast majority of luxury fashion apparel is imported, ie foreign brands (although I wonder how much of it might be 'made in China'?). However, in terms of market size- China is officially the Worlds largest fashion market. Geddit?

Aren't you actually glad that this is something that China buys far, far more of from us (the West), than they sell to us?

[Switch]

Perhaps, but a chart showing us the size of the brands that make fashion apparel does not tell us where it is sold- ie the market size. It is a non sequitur. The domestic Chinese luxury fashion industry is tiny, a fledgling compared to behemoths like the USA & France- albeit growing. The vast majority of luxury fashion apparel is imported, ie foreign brands (although I wonder how much of it might be 'made in China'?). However, in terms of market size- China is officially the Worlds largest fashion market. Geddit?

Aren't you actually glad that this is something that China buys far, far more of from us (the West), than they sell to us?

… from us… ? Do you mean Australia? Unless it’s clothing manufactured from mining resources, you are probably incorrect.

China’s leadership is the problem, not counterfeit produce. Plus declining birth rates and an increase in old age dependency ……..

Housing bubble about to burst big style? Covid policy in tatters?Unsustainable GDP growth?

Not very good at forecasts since you retired from finance in HK?

China will not overtake the US, but they will be replaced by India on GDP.

[sabang]

… from us… ?

I mean the West- as I made obvious. Australia? Is that an attempt at swish humour?

As far as GDP is concerned, China is expected to overtake the USA by the end of this decade. In PPP terms, it is already the Worlds largest economy by a fair margin. Based on current demographic trends, India may well overtake China in the last quarter of this century. I believe it has already overtaken China in population.

[panama hat]

China is by far the World's largest market for those ridiculous fashion houses, basically it keeps them afloat.

Still no links to this?