India to Witness Manufacturing Operation Shift from China!

Global companies are looking for a manufacturing operation shift from China to India!

Union Finance Minister Nirmala Sitharaman said that overseas companies are looking to move out from China and set up their operations in India as they believe in the country’s growth story.

She further said that the government would do everything to create an ecosystem for the industry to invest in India and provide the schemes required. The minister said that policies like production-linked incentives (PLI) and tax cuts have been provided to support private industry in India. And now global companies are looking for a manufacturing operation shift from China to India. The shift of international business away from an increasingly authoritarian and economically troubled China is continuing with Apple announcing it would move more iPhone manufacturing to India over the next few years.

Why Such a Shift?

The shift is a response to growing concerns about the geopolitical tensions and pandemic-induced supply chain disruptions that have involved China in the last few years. China has long been the world’s factory floor for high-tech electronics, unrivaled in its ability to secure legions of high-skilled workers and the production capacity to handle the demand for the next hot device.

The latest iPhone model will be manufactured in a Foxconn facility near Chennai for sale in the Indian market, TechCrunch reports. Apple had previously only assembled older models in India.

Walmart is also looking to increase the presence of Indian companies on its online marketplace in the U.S. and Canada, according to Mint, an Indian financial publication. Walmart hopes to have $10 billion per year in exports from India by 2027.

This comes as China and India are becoming increasingly adversarial in their diplomatic relationships. China recently blocked a U.S.-led effort at the U.N. to add Pakistani terrorist Sajid Mir to a global terror list. It is the third time China has blocked an effort to add Mir to the list. Mir planned the 2008 Mumbai attacks that claimed the lives of 166 victims. China’s move prompted the editorial board of the Economic Times, one of India’s top English-language newspapers, to call China a “protector of global terrorism,” and external affairs minister S Jaishankar suggested in a speech at the U.N. General Assembly that China was “defending proclaimed terrorists.”

But U.S. companies are seeing more risk there — a perspective forged during the Trump-era trade war, with its tit-for-tat tariffs, and cemented by China’s saber-rattling after Speaker Nancy Pelosi’s visit to Taiwan last month. They fear that basing a supply chain largely in China may thrust them into the middle of its escalating conflict with the United States over Taiwan.

China is still, by far, the most dominant consumer electronics manufacturer. But it’s not just smartphone production that is moving out of the country. Apple is producing iPads in northern Vietnam. Microsoft has shipped Xbox game consoles this year from Ho Chi Minh City, Vietnam. Amazon has been making Fire TV devices in Chennai, India. Several years ago, all of these products were made in China.

Talking about India’s “facilitative ecosystem”, the finance minister said that a lot more companies are looking to move their manufacturing operations out of China and want to come to India as they find policies like PLI attractive. “Countries abroad think India is the place to be right now. FDIs and FPIs are coming. Retail investors believe in India,” she said.