India, the new factory of the tech world? Its assets to compete with the Chinese giant – L’Express

Even the boss of Apple, Tim Cook, was recently seduced by India. After cautiously experimenting with smartphone manufacturing there, it is now accelerating the pace: from 3.5% in 2022, the share of iPhones produced in the country could exceed 20% by 2025, according to some observers. For the first time this year, manufacturing of the new iPhone 15 started simultaneously in India and China. Quite a symbol.

The enthusiasm for India can be understood. In April it became the most populous nation in the world with 1.417 billion inhabitants. Which gives it undeniable assets to titillate the supremacy of China, the factory of the world. “India has a very large workforce,” points out Richard Rossow, chair of India-US policies at the Center for Strategic and International Studies (CSIS). This workforce often speaks English. And the cost of labor there, weighted by productivity, remains “one of the most competitive in the world in the manufacturing sector”, specifies a study by the Boston Consulting Group (BCG) published in September.

The size and youthfulness of the Indian population – whose median age is 29 – make it “a very attractive market for tech giants”, recalls Ravi Srivastava, senior associate director of BCG. India is already the second largest smartphone market in the world. Last year alone, 200 million devices were sold there. “The government has also taken steps to encourage the manufacturing of technological products,” emphasizes Richard Rossow. Since 2014, Prime Minister Narendra Modi has been trying to eclipse the famous “made in China” with his own initiative: “make in India”.

“Certain measures are protectionist, such as the increase in customs duties on electronic products, but there are also incentive policies,” points out the CSIS expert. The most important? 24 billion dollars in aid, over five years, aimed at different manufacturing sectors – electronics, electric batteries, textiles, etc. – via the vast production-linked incentive program (PLI). “A little more than 10 billion are planned in this plan for the manufacture of semiconductors and screens alone,” underlines Kamlesh Sethi, head of thematic engagement in the branch. engineering edge from the Indian giant Wipro.

Result: India progresses in the ranking. Whereas ten years ago it imported most of its phones, it is now a net exporter in this area. “India has become the second largest smartphone manufacturing hub in the world,” said Prachir Singh, senior analyst at Counterpoint Research.

In the United States, the dynamic is palpable. Between 2018 and 2022, the value of goods imported from India increased by 392% in consumer electronics, and by 143% in semiconductors and materials, says the BCG study on the transformation of the global manufacturing ecosystem.

Figures, however, which cannot make us forget the still abysmal gap between India and China. Trains, roads, port equipment… India’s infrastructure fabric is still very fragmented. “And the electricity supply is still unreliable,” notes Richard Rossow. Despite the profusion of its workforce, the country also has gaps in the category of “highly qualified workers, in certain cutting-edge fields such as semiconductors”, specifies the expert.

Foreign groups must finally come to grips with a labyrinthine administration which is enough to frighten the most daring. “A small company with one factory and 500 employees will need to have around 23 licenses, apply more than 750 compliance provisions and will have to file an average of 120 declarations per year,” underlines a World Economic Forum 2021 report. The laws on land, as well as the Labor Code, do not shine with their clarity and fluidity. As for regulations, they often differ in the 29 states of this federation.

Opposite, China seems light years ahead. “Everything is done quickly. The labor market makes it possible to recruit temporary workers or part-time staff in less than twenty-four hours. The services of the Chinese administration have made enormous progress and do not represent a barrier” , confides Jean-Louis Bonnaffé, a Frenchman living in Shenzhen since 2009, founder of Semaforge, a company which helps companies design electronic products – connected objects, security systems, etc. – and set up assembly lines in China. When Elon Musk chose Shanghai to build Tesla’s second gigafactory, it was built in just ten months.

“Most Chinese production lines meet European standards,” explains Jean-Louis Bonnaffé. Factories are also increasingly automated and offer an increasing level of quality. As for infrastructure, a world separates China from India. The Middle Kingdom began to look into this strategic subject as soon as the country’s economic opening, under Deng Xiaoping, in the 1980s. And, after the outbreak of the financial crisis in 2008, the Chinese authorities launched colossal investment programs. As a result, China is now remarkably equipped in this area. It is home to no less than 7 of the 10 largest ports in the world and has three times more kilometers of TGV tracks than the rest of the world. The ecosystem that has been created in China around the manufacturing of technological products is just as advanced.

In the “Pearl River” delta, Shenzhen is the most eloquent example. This former fishing village has transformed, in just a few decades, into a world-class technological hub. Today, over 2,200 square kilometers – 20 times the city of Paris – it is home to tech colossi like Huawei and Tencent, smart factories and tens of thousands of start-ups.

When Tim Cook, Apple’s boss, declared last March that his firm’s relationship with China was “symbiotic”, it was not flattery but pure and simple reality. Apple took twenty years to build a huge industrial Meccano in China, backed by thousands of partners. And it generates almost 20% of its turnover in the region, including Taiwan and Hong Kong.

Despite its encouraging initial successes in the field of smartphones, India still has a way to go. “In areas such as computers, televisions or semiconductors, India has had very modest success. The country imports around $80 billion in electronic products per year, three times more than it exports “, points out Richard Rossow. And even in smartphones, Raghuram Rajan, former director of the Reserve Bank of India, notes in a note that, apart from the final assembly of the phones, few manufacturing steps ultimately take place in the country.

Other factors, more geopolitical, nevertheless play in its favor. Relations between the United States and China, which had cooled during the mandate of Donald Trump, have not warmed up under the presidency of Joe Biden, quite the contrary. After Huawei in 2019, another Chinese giant, TikTok, found itself in the sights of the American authorities, who are threatening a ban. The United States is working to reduce China’s access to the most sophisticated electronic chips. Just this month, the Biden administration announced new measures aimed at depriving China of those needed to train generative artificial intelligence. China is also posing more or less veiled threats to iPhones or exports of strategic metals.

In this tense climate, more and more foreign manufacturers are studying the idea of ​​no longer relying solely on China for manufacturing, but on a pair, according to the so-called “China + 1” strategy. A position eyed by New Delhi, which is actively strengthening its ties with the United States, Australia and Japan within their “club of four”, the Quad. If India plays its game well, it could become this famous “+1”. She is not the only one in the running: other countries, notably Vietnam, are going out of their way to invite themselves to the table.