Will India Be The Next World Factory

 "Made in China" and "Made in India" are embarking on a new round of competition and cooperation. Foxconn, the world's largest foundry company and Taiwan, signed a contract in India, and its plan to invest in India has become a reality.

Foxconn signed an agreement with the government of Maharashtra, India, to invest $5 billion over the next five years to build an electronics manufacturing facility in the state.

With the increase in overcapacity in China's manufacturing industry and rising labor costs, some manufacturing companies are gradually turning some factories to countries with lower labor costs such as India. In this migration boom, India will become the next “world factory”?

Big transfer

 After signing an agreement in Mumbai, the capital of Maharashtra, Foxconn founder Guo Taiming and Maharashtra’s chief minister, Devendra Fadnavis, announced the investment news. .

Guo Taiming said that Foxconn will look for local partners to build a planned factory in Maharashtra. Foxconn's customers include Apple, Blackberry, Xiaomi and Amazon.
 Guo Taiming also said in New Delhi that he intends to build manufacturing plants in other Indian states and seek possible cooperation opportunities.

India is currently the fastest growing smartphone market in the world. Both Apple and Chinese smartphone makers are hoping to get a slice of India's fast-growing smartphone market.

Xiaomi mobile phone has always wanted to grab the Indian market. The industry speculates that Foxconn’s factory in India will first start the mobile phone OEM for Xiaomi’s sales in India. In this regard, Foxconn's spokesperson has not yet responded.

It is a general trend to export China's industrial capabilities overseas. Li Dongsheng, chairman and CEO of TCL Group, revealed in an exclusive interview with the "First Financial Daily" reporter in March last year that TCL will establish its own industrial capabilities in Brazil and India last year.

Li Dongsheng told this reporter that the cost of producing a mobile phone in China is lower than that of Brazil, but the tariffs in Brazil are high and the tariffs in India are also high. The construction of industrial bases in the region is conducive to entering the local market. India has a population of 1.2 billion. Brazil has a population of 300 million and has a huge market potential. Moreover, the tariffs imported by developed countries from Brazil and India are lower than those imported from China, so overseas bases also help TCL enter the developed markets. Next, TCL will also build industrial bases in Russia and Africa.

 “To go overseas, not only production, but also the establishment of brand and service capabilities.” Li Dongsheng suggested that the country should not only support capital output (resources and infrastructure projects) but also industry output in the “One Belt, One Road” international strategy. (Chinese companies internationalization), support our industrial capabilities, product technology capabilities, brand channel capabilities in the local roots.

China’s “One Belt, One Road” strategy has been supported by AIA India. Indian Prime Minister Modi visited Xi'an in China and was treated with the courtesy of the Tang Dynasty to greet the state guest. The photos of Modi and the Terracotta Warriors are still fresh in memory.

Chinese manufacturing pressure

 India is well-known for its global software outsourcing business. Both “Indian Service” and “Made in China” are famous overseas. However, Modi now also wants to establish the reputation of "Made in India." When reporters from China Business News visited Germany at the Hanover Electronics Show in March last year, they found that India specifically advertised “Made in India” in the local media. Modi also wants to introduce Chinese investment and actively develop local manufacturing in India.

 China's current overcapacity, encouraging Chinese companies to set up factories in India and other places, can not only digest excess capacity, but also help Chinese companies "go out." At this point, China and India can achieve mutual benefit and win-win results.

In fact, the cost of manufacturing in China is rising year by year. According to research data from the Boston Consulting Group, the cost of “Made in China” is close to that of the United States. The report analyzes the top 25 economies in terms of global exports, based on the US (100), and the manufacturing cost index is 96. That is to say, the same product, the manufacturing cost in the US is 1 US dollar, then in China. It costs $0.96, which shows that the gap between the two sides has been greatly reduced.

The report believes that China's manufacturing industry is under great pressure. Ten years ago, China’s manufacturing costs were low, but today’s costs are rising. There are three reasons: First, because the wages of Chinese workers have increased, China's salary from $4.35 in 2004 rose to $12.47 in 2014, an increase of 187%. The second is the exchange rate. From 2004 to 2014, the exchange rate of the RMB against the US dollar rose by 35%. Third, energy costs, China's electricity consumption increased from $7/kWh in 2004 to $11/kWh in 2014, while natural gas costs rose from $5.8/million BTU to $13.7, an increase of 138. %.

How to deal with the relationship between Indian manufacturing and Chinese manufacturing will test the wisdom of Chinese companies. Following Japanese and Korean companies such as Panasonic, Samsung, and LG, Chinese companies are also keen to set up factories in India to use India's low labor costs to actively explore the Indian market. On the other hand, Chinese factories are also increasing production efficiency, including the introduction. Automated equipment such as robots, while continuously enhancing research and development capabilities. When exporting industrial capabilities to India, increasing the added value of Chinese manufacturing is believed to be a good choice for Sino-Indian manufacturing competition.