India emerging as new global technology, innovation hub

Google’s decision to manufacture its flagship phones in India, following the similar move by another multinational technology firm Apple, gives clear indication that India is emerging as a new global technology and innovation hub.

On the same note, India has begun its journey to become the major global semiconductor producer and electronics repair hub. India is using its gargantuan local market, cheap labour, innovative ecosystem and geopolitical equations to its advantage, reports Times of Oman.

Google’s senior vice president Rick Osterloh praised India for establishing itself as a “truly world-class hub” for manufacturing, resulting in a thriving environment for businesses to flourish. “We are very excited to announce our plan to manufacture Pixel smartphones in India. We expect these devices to start to roll out in 2024, joining India’s “Make in India” initiative,” he said.

Google has begun the process of partnering with international domestic manufacturers for production of smartphones in India.

India became a natural choice for Apple seeking to cut its reliance on China. It has become an attractive destination thanks to its massive domestic market, cheap labour, and government incentives. On the other hand, China ceased to remain the destination for cheaper production costs.

“Labour in China is now expensive. So if you want to lower your cost of production, you have to move to other countries like India,” said Nitin Soni, senior director of Fitch Ratings.

According to the Bank of America, total global iPhone production in India is set to increase from 7 per cent in 2023 to 25 per cent in 2025. “We believe India could be a credible global supply chain alternative for mobile phone/electronics. Success in other sectors is also likely. We believe India's efforts to cut imports/step-up exports, could improve its macro outlook," said Amish Shah, head of India research at Bank of America.

There have been concerns in China as Apple expedited the shift of production away from the country, and it became louder after Apple partner Foxconn Technology Group announced the investment of about USD 700 million in a new plant in India. 

India has set an ambitious target of production of electronics items worth USD 300 billion.7 According to Counterpoint Research, India has emerged as the second-largest global hub for mobile phone manufacturing. Its Senior Research Analyst Ivan Lam said

“India is now the second-biggest manufacturing hub for mobile phones due to heavy investment from OEMs, ODMs, and companies dealing in components and parts. India is expected to export about 22 per cent of its total assembled mobile phones in 2023.”

India has come up with new policies and measures including strong financial incentives to woo semiconductor and display manufacturers. 9 And there has been a positive response. Applied Materials, an American company that supplies equipment, services and software for the manufacture of semiconductor chips, has decided to invest $400 million in India.

AMD also announced the investment of $400 million in India as its Chief Technology Officer Mark Papermaster attended the 'SemiconIndia 2023' conference. Micron Technology has pledged an investment of $825 million to set up a semiconductor assembly and test facility in India’s Gujarat.

India is leaving no stone unturned. It is trying its hands at electronic repairs as well. It has launched a pilot project to make India the repair capital of the world. “Repair outsourcing will incentivise electronic manufacturers to further expand their production capabilities in India. This is a critical step towards ensuring resilience to supply chain shocks,” said Ali Akhtar Jafri, Director General of Manufacturers' Association of Information Technology (MAIT).

There is a lack of agreement over India replacing China but the possibility cannot be ruled out thanks to its increased capabilities and current geopolitical dynamics. “India shines as a promising alternative in supply chains, innovation hubs, and joint-ventures. As the world’s largest democracy with an increasingly open economy and a strong technology sector, it has the potential to operate at scale,” said General Catalyst CEO Hemant Taneja in Harvard Business Review.