Taiwanese tech giant and a key contributor to Apple’s revenue, Foxconn plans a $1.6 billion more investment in India, aligning with its strategy to diversify manufacturing away from China amid U.S.-China tensions. Over years, Foxconn has been pivotal in India, producing iPhones, including the latest iPhone 15, generating approx. $10 billion annually. This investment underscores Foxconn’s commitment to expanding its Indian footprint. India’s tech manufacturing advances with Google’s Pixel 8 production, positioning the nation as a global leader. Initiatives like the Production-Linked Incentive (PLI) and SPECS reinforce India’s manufacturing push. With a target of $300 billion in electronics manufacturing and exports by 2026, India’s strategic advantages make it a compelling alternative to China, transforming the global supply chain. In pharma sector also, India leverages supply chain shifts, attracting Western pharmaceutical giants, poised to secure a significant share in the global pharma services market, further enhancing India’s position in global manufacturing and services.

According to latest reports in a business daily, Hon Hai Precision Industry Co., the Taiwanese manufacturer of iPhones, plans to further expand its operations in India with a substantial investment of NT$50 billion ($1.6 billion) in construction projects. This decision aligns with Hon Hai’s, also known as Foxconn’s, broader strategy of diversifying its manufacturing base away from China amidst escalating tensions between the United States and China.

Foxconn, a major contributor to Apple Inc.’s revenue, has established a longstanding presence in India. Over an extended period, they have been engaged in the manufacturing of various products, notably including the latest technological marvel, the iPhone 15. With nine production campuses and over 30 factories already employing tens of thousands of people in India, Foxconn generates around $10 billion in revenue annually from its Indian operations. This investment signals Foxconn’s commitment to expanding its Indian footprint and leveraging the country’s growing manufacturing capabilities.

Meanwhile, India’s tech manufacturing sector has taken a significant leap forward with the commencement of Google’s Pixel 8 production in the country. It marks a turning point in India’s aspiration to become a global leader in cutting-edge mobile technology manufacturing, according to The Washington Times. Google’s decision aligns with the broader trend of tech giants like Apple and Samsung expanding their manufacturing bases to India, cementing the nation’s position in the global supply chain.

Apple’s iPhone assembly operations in India have proven to be mutually beneficial. This localization strategy not only allows Apple to meet local demand efficiently but also reduces the impact of import duties. Samsung, too, has established the world’s largest mobile phone manufacturing facility in India, demonstrating the country’s ability to meet the production needs of global tech giants, as reported by The Washington Times.

Since 2020, India has witnessed a surge in electronics manufacturing, with major players like Cisco, Taiwan’s Delta Electronics, Apple’s suppliers Pegatron, and China’s Luxshare establishing their presence in the country. These companies are manufacturing a diverse range of electronics, including wearables, hearables, network switches, and routers.

Micron, a global chip giant, is setting up a semiconductor fabrication plant (fabs) in Gujarat, while Foxconn is actively seeking a new location after exiting a joint venture with Vedanta. India’s integration into Apple’s ecosystem has accelerated rapidly over the past three years, with smartphone exports from the country skyrocketing from a mere 1% in 2020 to 7%, according to various estimates.

Cisco is poised to commence production through a contract manufacturer in Chennai in the coming months, while Luxshare awaits approval for its manufacturing operations after acquiring a defunct Motorola facility in Tamil Nadu. Foxconn has significantly expanded its Sriperumbudur unit, employing over 35,000 people to assemble multiple models of Apple iPhones. The Taiwanese giant is now expanding its reach into Karnataka and Telangana, where it will not only assemble smartphones but also manufacture high-end electronics components.

A significant shift is underway in global supply chains, with India emerging as a compelling alternative to China. This transition is driven by a surge in U.S. and European investments in India, which have quadrupled since 2021, while investments in China have declined sharply. India offers a stable and democratic environment, making it an attractive destination for companies seeking to diversify their sourcing strategies. India’s large and skilled workforce, coupled with its strong economic growth, further enhances its appeal as a global manufacturing hub.

In 2017, a pivotal shift began in the world of supply chain management, driven by a convergence of factors. China’s stringent environmental regulations triggered wintertime production cuts, signalling the start of a broader diversification trend. This was further amplified by shifting geopolitical dynamics, the escalating trade war, and the growing desire of multinational corporations (MNCs) to mitigate supply chain risks. The COVID-19 pandemic served as a catalyst, accelerating the adoption of this strategy, which is now firmly entrenched and appears to be a permanent fixture in the global supply chain. This transformative approach is aptly termed the “China Plus One Strategy.”

The ongoing trade tensions between the United States and China have highlighted the perils of overreliance on a single manufacturing hub, compelling businesses to seek alternative locations for diversifying their supply chains. India emerges as an attractive option in this endeavour, presenting companies with an opportunity to mitigate risks through supply chain diversification. India’s strategic advantages, including a stable democratic government, a robust legal system, and a well-established regulatory framework, position it as a frontrunner in the China Plus One strategy. By leveraging these strengths, India can harness this diversification trend to propel its economic growth.

Earlier this year, premier Indian Industrialist Anand Mahindra observed that India is poised to overtake China as the world’s manufacturing power house. Due to its exceptionally low manufacturing costs, the country has emerged as a global manufacturing hub, attracting renowned companies like Apple, Samsung, Boeing, and Toshiba to shift a significant portion of their production to the country. Supply chain disruptions caused by the COVID-19 pandemic may have indirectly helped India’s ascent as a global manufacturing hub. India boasts an exceptional position in terms of digital infrastructure, with the lowest cost of mobile data among major economies. At a fraction of the cost in other countries, India’s mobile data and internet access are remarkably affordable. In fact, India’s mobile data is a staggering 73 times cheaper than South Korea, which holds the distinction of having the highest mobile data costs among major economies. Mahindra added that apart from Western nations, countries like Singapore, the second largest foreign investor in India, are also making significant investments in India. 

According to an Invest India (National Investment Promotion and Facilitation Agency) handbook on attractive investment destinations, released in June, 2023, India’s GDP growth has soared at an astounding 257% between 2004-05 and 2018-19, propelling it to the position of the world’s sixth-largest consumer market. With a remarkable 49% workforce participation rate, India is poised to be a formidable driving force behind global economic growth for the foreseeable future.

The presence of global technology leaders like Apple, Google, and Samsung in India’s manufacturing sector is a resounding affirmation of India’s rising status as a hub for high-quality tech production. The synergy between India’s manufacturing prowess and global tech behemoths not only bolsters the country’s economic outlook but also cements its strategic position in the global supply chain. This mutually beneficial partnership allows companies to harness India’s skilled workforce and favourable policies, while India gains from technological advancements and economic investments. As India continues on this path, the ripple effects are poised to transform the global supply chain, ushering in a new era of high-quality tech manufacturing firmly rooted in India.

The Indian government has implemented initiatives like the production-linked incentive (PLI) scheme and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), aiming to bolster domestic manufacturing and foster technological independence. A total of 32 companies have been approved under the PLI-1 and PLI-II schemes for large-scale electronics manufacturing, resulting in an investment of Rs 6,887 crore from April 2020 to June 2023. Additionally, Rs 12,000 crore has been invested under the SPECS scheme.Emboldened by the vast opportunities and the trust placed in India’s immense workforce, the government has boldly established a target of achieving $300 billion in electronics manufacturing and exports by 2026. Currently, India’s exports account for a mere 1.2% of the global electronics market.

While the Production-Linked Incentive (PLI) scheme has fostered manufacturing capacity in India, Angshuman Bhattacharya of the consulting Firm Ernst and Young speaking to the newspaper Deccan Herald cautioned against solely focusing on product assembly, citing potential overcapacity and market disruption. He advocated for a shift towards value-added activities like component manufacturing, design, and innovation to enhance profit margins and leverage technology effectively. Bhattacharya emphasized the importance of establishing a robust ecosystem around product assembly to drive innovation and enable MSMEs and start-ups to flourish. He further urged India to embrace intellectual property (IP) protection in technology to attract global suppliers and establish itself as a competitive alternative to China and Taiwan in the electronics manufacturing hub.

Another industry expert observed that building upon the success of smartphone manufacturing, India now accounts for over 20% of global production. While venturing into component manufacturing is the ultimate goal, assembling components is a crucial first step, and this is already underway.

Pharma and biotech are another sector in India banking on the global supply chain realignments and the emerging China plus one policy. Amidst rising geopolitical tensions, pharmaceutical companies are seeking to diversify their supply chains, reducing their dependence on Chinese contractors for clinical trials and early-stage drug manufacturing. This shift offers a significant opportunity for Indian drug makers, who are witnessing a surge in interest from Western pharmaceutical giants.

India’s four largest contract development and manufacturing organizations (CDMOs) – Syngene, Aragen Life Sciences, Piramal Pharma Solutions, and Sai Life Sciences – have reported a noticeable increase in inquiries and collaborations with Western pharmaceutical companies, including major multinationals. While the benefits for Indian manufacturers may not be immediate, the long-term outlook remains promising. As treatments in early development progress towards commercialization, outsourcing contracts for API production are expected to become increasingly lucrative for Indian CDMOs.

India is actively pursuing a larger share of the global pharma services market, aiming to boost both sales and reputation for its $42 billion pharmaceuticals industry. Market research firm Mordor Intelligence estimates India’s CDMO industry to generate $15.6 billion in revenue this year, compared to $27.1 billion in China. However, India’s CDMO industry is projected to grow at an average rate of over 11% annually over the next five years, outpacing China’s anticipated growth of 9.6%. In conclusion, India’s transformative journey towards becoming a global manufacturing hub gains substantial momentum, fuelled by strategic investments and diverse initiatives. The influx of major players like Foxconn, Google, and pharmaceutical giants showcases India’s evolving role in the global supply chain. The nation’s resilient tech manufacturing sector, bolstered by favourable policies and a skilled workforce, positions it as a compelling alternative to China. As India navigates the complexities of global dynamics and embraces innovation, it stands poised to reshape the landscape of high-quality tech production and pharmaceutical services, marking a paradigm shift in the global economic order. The synergy between global tech leaders and India’s initiatives positions the nation as a transformative force, heralding a new era in high-quality tech manufacturing.