As India is looking to become the third largest economy in the world in the coming years, cutting-edge technologies across 5G/6G, satellite communication (SatCom) and semiconductors will contribute towards this growth. These three technologies are collectively expected to add approximately $240 billion to the nation’s economy in the next five years and are estimated to contribute an additional around 1.6 per cent to our GDP by FY28. These findings were released by KPMG in India in association with the India Mobile Congress (IMC) 2023.
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India is demonstrating its prowess in transitioning from an assembler in electronics to a holistic, integrated, end-to-end manufacturer. Through backward and forward integration, Indian companies are developing niches that will help the country move beyond assembly operations. The digital economy in India is on an exponential growth trajectory, powered by the continuous evolution of the information and communications technology (ICT) sector. India’s forward-looking 6G vision document has positioned its digital prowess at the forefront of global technology. Furthermore, India’s population dividend and technological progress give it a tremendous advantage and can help the country achieve its goal of becoming a dependable global digital leader with cooperative action on digital literacy, cybersecurity, new technologies and export promotion.
India followed the world in 4G, marched with the world in 5G, and now aims to lead the world in 6G. And to accelerate the 6G revolution, India, under PM Narendra Modi’s visionary leadership, is investing in research and development activities to contribute to the advancement of 6G technology, strengthen the global knowledge base, and help shape the future of this technology.
In the semiconductor space, the Modi government is working aggressively to enable India to be at the centre of the global semiconductor supply chain and is offering some of the most attractive incentives globally. In total, India is offering $30 billion in support for semiconductors and related industries.
Speaking of massive strides under Modi, the very first Apple product that was available for sale in India was the Mackintosh computer, way back in 1998. But guess what? It was only in 2017 that Apple started making iPhones in India through Pegatron, Foxconn and Winstron, and it was only on 18 April 2023, that Apple opened its first store in Mumbai. Basically,it took a good 25 years for Apple to open a store in India,but the good news is that Apple’s stores in Mumbai and Delhi are a big deal for India for various reasons. More than 90 per cent of Apple’s iPhones were earlier produced/assembled in China, until two years ago, but there is a palpable shift now in India’s favour. What caused this paradigm shift in coaxing Apple to ‘Make in India’?
Well, under the handset PLI scheme of the Modi government, foreign companies needed to invest Rs 250 crore and attain Rs 4000 crore worth of incremental output in the first year itself to be eligible for a 6 per cent incentive as payback. Apple’s contract manufacturers, namely Foxconn and Pegatron, both located out of Tamil Nadu, and Wistron, which is in Karnataka, are participants in the Modi government’s smartphone production-linked incentive (PLI) scheme launched in April 2020, and have committed to jointly producing Rs 3.6 lakh crore worth of iPhones over a 5-year period, of which 80 per cent will be exported.
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Apple, in fact, overtook Samsung to become the leading mobile phone exporter in November 2022 and achieved the record of touching $1 billion in mobile phone exports from India in December 2022. Last December was also a record month for the industry, with mobile phone exports of over Rs 10,000 crore. Apple and Samsung have been the leading players in exporting mobile phones from India. To make India a manufacturing hub, the Modi government extended the PLI scheme to 14 sectors in 2021, the largest of which is the smartphone PLI scheme, with an outlay of Rs 40,995 crore. Under the scheme, the government estimates a total incremental production of Rs 10.05 lakh crore, exports of well over Rs 6.5 lakh crore, and direct and indirect jobs of up to at least 8 lakh, maybe more by 2026. The top five global destinations that India currently exports mobile phones to are the UAE, the US, the Netherlands, the UK and Italy. India’s push towards local manufacturing of consumer electronics items has proved to be a game-changer for the country. More than 97 per cent of the smartphones sold in India are now being produced locally, which is a remarkable achievement.
India is expected to match China’s production capacity of 45 to 50 per cent for Apple’s iPhones by 2027. As of the end of 2022, India’s production capacity accounted for 10-15 per cent of iPhones overall, from barely 1 per cent in 2021. Apple is exploring ways to reduce its reliance on China as tensions between Washington and Beijing continue to escalate. Its longtime partners, who make most of the world’s iPhones from sprawling factories in China, have added assembly lines in India at a rapid pace over the past year. Apple Inc. assembled more than $7 billion of iPhones in India last fiscal year, tripling production in the world’s fastest-growing smartphone arena after accelerating a move beyond China.
The world’s most valuable company struggled last year with chaos at Foxconn’s main “iPhone City” complex in Zhengzhou, which drove home vulnerabilities in Apple’s supply chain and forced it to cut output estimates. At the same time, PM Modi has dished out a spate of incentives to boost local manufacturing.
Apple could assemble a quarter of all its iPhones in India by 2025. Apple’s suppliers, Foxconn, Wistron and Pegatron, together employ some 60,000 workers in India, making models ranging from the ageing iPhone 11 to the latest iPhone in the country. That has helped place Apple at the heart of India’s ambitions to become a major manufacturing hub and an alternative location to China. Apple is among the world’s most exacting when it comes to manufacturing; its production chain encompasses hundreds of companies across the world and employs millions, and China has a large share in it.
The migration of iPhone production represents an economic triumph for India that could have implications for how other US brands plan their futures, especially at a time when the Chinese economy is sputtering after years of punishing COVID-related restrictions.
Reducing exposure to China’s dominance in the technology supply chain built over decades will face significant challenges, but that dependence could be reduced by 20 to 40 per cent in most cases by 2030 or even earlier. For instance, the news about the Tata group deciding to manufacture the iconic iPhone for global markets is a very positive development and will help grow the Indian EMS and supply chain/component ecosystem. The withdrawal of Foxconn from its JV with Vedanta changes nothing about India’s semiconductor goals. Not a thing. If anything, it allows both companies to independently pursue their strategies for Indian semiconductors and electronics.
All the huffing and puffing by those in Congress who did nothing about India’s electronics and semiconductor capabilities whilst other players from other countries grew in these last 3 decades should not be lecturing the Modi government. Tremendous progress has been made in electronics manufacturing in the last 9 years and rapid progress has been made in the semiconductor space in the last 18 months. In fact, both Foxconn and Vedanta have independently declared their commitment to India’s semiconductor programme, but they will do so with other partners.
Foxconn has announced that they are preparing to apply for Silicon Fab and Display Fab. Similarly, Vedanta has also committed to reapplying with new partners. Besides, other major semiconductor companies are seriously evaluating India as a semiconductor design and manufacturing hub. This is bad news for the Congress, which actively attempts to scuttle any new initiative India takes. It is now worried that India’s rise as a semiconductor manufacturing hub will further consolidate its position in the world as a credible player in the technology domain. Why does the Congress loathe a confident and self-reliant India? Foxconn is the largest assembler of Apple iPhones in India. In FY23, out of $11 billion worth of smartphone exports from India, exports by Apple alone were over $5 billion, in which Foxconn, as the assembler for iPhones, played a key role. Overall electronics’ exports from India in FY23 were up 49 per cent over FY22, at a record $25.3bn, underlining the resounding success of the Modi government’s PLI scheme. Under the Congress regime, the above number was not even $2.5 billion.
Tata Group, India’s largest conglomerate, is close to an agreement to acquire Wistron’s Karnataka-based factory soon, marking the first time that a local company would move into the assembly of iPhones, according to people familiar with the matter. An Indian company making iPhones will prove to be a significant boost for efforts to challenge China’s status as the factory of the world. In fact, China’s status on this count has already started receding.
Companies making and selling high-end devices, such as iPhone from Apple and Galaxy S and Note Series by Samsung, are among the big beneficiaries of the PLI scheme, as are some homegrown players like Lava, Karbonn, Micromax and Intex. With the demand for electronics hardware expected to rise rapidly to over $400 billion by 2025, India cannot afford to bear foreign exchange outgoes on account of electronics’ imports. Interestingly, iPhone exports crossed Rs 40,000 crore in FY23, which means Apple alone contributed 45 per cent of the total Rs 90,000 crore mobile phone exports from India.
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Therefore, decisions by the likes of Apple, Foxconn and Micron to either expand or establish their India presence could not have come at a better time. ‘Make in India,’ based on access to markets, capital and technology, is not just a slogan but a work ethic that is rapidly transforming India’s industrial landscape, driven, among other things, by the prime minister’s unrelenting global outreach. With the Tata Group acquiring Wistron’s India operations, it will be the first time that a local company would move into the assembly of iPhones. An Indian company making iPhones will prove to be a significant boost to the government’s persistent efforts to challenge China’s status as the factory of the world. In fact, China’s status on this count has already started receding rapidly. ‘Made in China’ is increasingly becoming passe, with ‘Make in India’ now taking over.
