Tech giants eye India. Can it compete with China's manufacturing industry?
As the Chinese economy begins to decelerate slightly, big tech companies are turning their sights to India.
On Monday, the Chinese smartphone maker Xiaomi launched the Redmi 2 Prime, the company's first device assembled entirely in India. Meanwhile, Foxconn, a Taiwanese electronics manufacturing company, and one of the largest suppliers for Apple, also announced its plan to invest $5 billion over the next five years to build factories in India. The news has been hailed as a sign that Prime Minister Narenda Modi鈥檚 "Make in India" campaign, which aims to transform India into a hub for global manufacturing, could be paying off, and that India may be on the road to competing with China for the attention of the world鈥檚 foremost tech giants.
"It is the biggest market for us beyond China, it will someday be as big as China,鈥� Xiaomi Vice President Hugo Barra, a former Google executive, said in a phone interview with last year. 鈥淲e are coming into India with full force.鈥�
Currently, manufacturing contributes around of India鈥檚 economic output, compared to 31 percent in China. Moreover, China has a competitive advantage over India because many of the components that go into electronic devices such as smartphones have been built and perfected in Chinese factories, experts note.
鈥淲hen Apple needs a new iPhone on short notice, the only factories that can quickly produce and assemble the required glass, chips and components are in China,鈥� noted Charles Riley for . 鈥淭he Redmi 2 Prime, for example, be will be made at an existing Foxconn factory in southern India -- using parts imported from China.鈥�
Still, rising labor costs in China are causing manufacturers to send feelers into other markets, and India is set to become the world鈥檚 second-largest market for smartphones in the next several years, surpassing the United States.
鈥淐hina has been the engine of global smartphone growth in recent years, but China is now maturing and slowing,鈥� wrote聽Linda Sui, director at Strategy Analytics,聽in released in July. 鈥淚ndia is fast becoming the next major growth wave. We forecast 118 million smartphones will be sold in India in 2015, increasing strongly to 174 million in 2017.鈥�
And many tech companies appear poised to capitalize on this growing market. Google, for example, has also been investing in the Indian market and pushing to increase internet access in the country of approximately 1.2 billion inhabitants. In September 2014, the tech giant launched in India, an initiative that aims to bring low-cost smartphones to many first-time users in emerging markets.
鈥淲e鈥檙e here really because 10 years from now a billion Indians will be online and when we have a billion Indians online we think that鈥檚 going to make a huge difference to the global internet economy,鈥� Rajan Anandan, Google鈥檚 managing director in India and Southeast Asia, told the .
Meanwhile, Chinese phone makers Huawei Technologies Co. and Oppo Mobile Telecommunications Corp. have announced that they too plan to begin producing some goods in India. And 聽Electronics Co. said that it already invested around $80 million in an existing plant in India, and is looking to expand even further into the country, .
India鈥檚 government, meanwhile, has pledged that it will continue to improve infrastructure and facilitate the entry of many large manufacturing companies into the country. Nonetheless, India will need to continue to expand if it is going to catch up with China鈥檚 already saturated market, observers say. And that will mean creating the facilities to manufacture all parts of smartphones and other electronic devices, not just assemble those imported from neighboring China.
鈥淩ight now we are assembling phones in India,鈥� Xiaomi鈥檚 India head, Manu Kumar Jain, told the Wall Street Journal. 鈥淭o manufacture the phone in India, the whole ecosystem would have to exist here. We鈥檙e hopeful that this will eventually happen.鈥�
