Tech companies are fleeing China. India knows this and has a plan to capture them on a large scale

Good opportunities, you know, you have to catch them on the fly. The maxim often applies to personal life, but it works just as well for business, as India wants to show. The New Delhi authorities have not gone unnoticed by the new winds that are blowing in Asia and are beginning to shake China’s until now dominant position as a large technology manufacturer, so they have done the most logical thing: pull the checkbook to capture the interest of the big companies.

Beyond Chinese borders. That is The horizon that some technological multinationals seem to grope. The Asian giant has become one of the great global consumer technology factories on its own merits, but in Beijing they see how there are firms that are looking for alternatives beyond their territory to diversify production. Apple makes iPads in Vietnam, from which Microsoft also ships Xboxes, and Amazon makes Fire TV devices in eastern India.

The most mediatic example is probably left by the Cupertino company. just a few days ago Guardian picked up how Apple has started manufacturing the iPhone 14 — launched in September — in India with a production line in Chennai assembling devices for the country’s domestic market. The multinational company with the bitten apple has been assembling phones in India since 2017, but until now its operations there had been limited to older models.

The New Indian Movement. Against this backdrop, the Indian authorities have decided to make a move to make their country even more attractive to businesses. How? Well, pulling the checkbook. as it reveals Bloomberg, the country plans to promote financial incentives for companies that decide to manufacture tablets and laptops in its territory, a measure with which it would be targeting relevant companies in the sector, such as Dell, Asustek Computer or Apple, in the latter case with a view put into the assembly of iPads. The goal: to encourage local production.

rain of millions. The plan –breaks down the American economic environment— contemplates offering up to 45,000 million rupees, about 549 million dollars, per manufacturer. In return, of course, foreign companies are required to invest a certain level for five years.

Incentives would also depend on components being purchased locally. It is not the first time that in New Delhi they decide to reach for the portfolio to arouse the interest of companies. In 2021, India has already launched a millionaire program also focused on the technological arena, but its incentives did not have a great impact on the sector.

not everything is checkbook. That’s how it is. Apart from its policy of attracting companies, the truth is that India has a powerful attraction for technology companies: its large market. Guardian precise that India, that is on its way to unseating China as the most populous nation in the world, is the second largest market for smartphones, behind China, and its trend is positive: that of computers and tablets grew at a rate of 12% during the last quarter, according to Canalys.

nor does it demand. There would be yet another factor, beyond incentives or the attractiveness of the local market: costs. As China has gained strength in the sector, developing environmental legislation or increasing control of corruption, its production bill has increased.

The minimum wage sets a good example. the tables of Expansion show that if in 2010 it was around 69 euros per month, in 2020 it was already 281. As an example, not long ago Foxonn was looking for workers in northwestern Vietnam for a salary that, at least at the access level, did not reach not even half of what he paid his new recruits from the Chinese factory in Shenzhen.

It’s business… and politics. The geopolitical factor also influences. The tensions between Beijing and Washington after Nancy Pelosi’s visit to Taiwan in August and the stoppages registered in China at the beginning of the pandemic, in addition to its recent and strict “Covid Zero” policy, with repercussions for companies, do not exactly play into favor of the attractiveness of the Asian giant.

The commercial war already led Donald Trump in 2019 to raise tariffs to Chinese imports and recently Joe Biden’s team also announced limitations in installing “advanced technology” in China for the country’s firms that receive federal funds.

Beyond India. When it comes to diversifying production and going beyond China, India is not the only option in Asia. Vietnam would also be benefiting from the new winds blowing in the sector. Guardian preciseciting analysts at JP Morgan, that Apple would aim to produce a quarter of all iPhone 14s in India by 2025, in addition to a fifth of its iPads, Apple Watches and more than half of its AirPods in factories in Vietnam for the same dates.

Cover image | Karl Janisse (Unsplash)