Indian corporate houses plan massive investments in electronics manufacturing as the technological cold war between the US and China intensifies. While Tata group’s new company, Tata Electronics Ltd plans to set up an iPhone manufacturing facility in the country, Reliance Strategic Business Ventures (RSBVL), a subsidiary of Reliance Industries (RIL), recently formed an electronics manufacturing joint venture (JV) with US-based Sanmina to produce 4G and 5G telecom equipment for local and overseas markets. Vedanta joined hands with Taiwanese manufacturing giant Foxconn to manufacture semiconductors with $19.5 billion investment.
Separately, the electronics and IT ministry had approved 314 applications with proposed investments of Rs 86,824 crore under a modified special incentive package scheme until May. Samsung, LG, Bosch, Tejas Networks of Tata group, Motherson Sumi Systems, Tata Power SED, Nidec India, Nippon Audiotronix, Continental Automotive, GE BE and Wipro GE healthcare were the initial applicants for the scheme. In October 2020, it cleared 16 proposals from domestic and global companies worth Rs 11,000 crore under the Production Linked Incentive (PLI) scheme to manufacture mobile phones worth Rs 10.5 lakh crore over the next five years.
The RIL subsidiary had said in March that it will invest ₹1,670 crore to form an electronics manufacturing JV with Sanmina. All the manufacturing will take place at Sanmina's 100-acre campus in Chennai. Tata Electronics had earlier announced an investment of Rs 4,684 crore for manufacturing electronics products at its Hosur facility in Krishnagiri, Tamil Nadu. In semiconductor manufacturing, more investments are likely to come. While addressing the US-India Business Council (USIBC) summit recently, Gautam Adani sought the help of US in building a self-reliant semiconductor chip manufacturing industry in India.
The Ministry of Electronics and Information Technology wants to enhance India’s share of electronic exports as well as grow the domestic market to $300 billion by 2026, from the current $75 billion. The challenges listed in its vision document include how India has the highest tariffs on import of components for electronic products, compared to competing electronics hubs like China and Vietnam. The other challenges mentioned include “regulatory uncertainty”, and “punitive duty structures and tax levies”.
The Department of Commerce in the US, in August, introduced the $50 billion CHIPS and Science Act of 2022 to strengthen the domestic semiconductor industry as a part of $280 billion capital for research and advanced technological manufacturing. The move was followed by the US-China geopolitical fallout, especially regarding Taiwan’s autonomy. The most developed countries are now worried that China is weaponising semiconductors and using them for destructive purposes. The US is also concerned about China's use of semiconductors for military purposes.
In order to reduce its dependence on China, Apple is shifting its device assembly process gradually to factories in Vietnam and India. At present, over 90 percent of Apple devices, such as iPhones, iPads, and MacBooks, are made in China. Foxconn and Luxshare Precision Industry, two of Apple’s major suppliers, are in talks to make Apple Watches and Macbooks in Vietnam for the first time. Other leading tech giants such as Google, Samsung, LG Electronics and Microsoft develop Vietnam as their major hub because of its cheap labour, geographic proximity to China and stable political environment. The Indian government will also have to facilitate a supportive policy ecosystem to attract global manufacturers to the country.