After Apple, Now Google to Produce Phones in India
WHAT HAS HAPPENED ?
Amid geopolitical tensions between the US and China and the Covid-19 restrictions in the latter, Google is reportedly mulling moving some of its smartphone manufacturing capacity to India.
According to The Information, Google wants to move some of its most important consumer electronics production outside China amid consecutive Covid-19 lockdowns that have disrupted manufacturing and supply chains in the country.
10% PHONES IN INDIA
The tech giant has reportedly invited bids from Indian players to manufacture 5-10 Lakh units of its Pixel smartphones.
Quoting a source, the report said that the number represents 10%-20% of the total estimated annual production of the device.
However, Google executives are yet to take a final call on the matter.
The source further added that Google has sought information from Indian manufacturers regarding materials that it can purchase locally such as glue, tape and insulation materials. Besides, it has also reportedly enquired about buying components for smartphone screens in India.
However, China would continue to remain critical to Google's plans.
As most of the smartphone components are made in China, Google's partners would have to set up facilities in the country to which it would ship components before sending them to India for final assembly, the source said.
GEOPOLITICAL TENSIONS & COVID DISRUPTIONS
The move adds Google to the growing list of companies moving manufacturing away from China, at least partially.
The country, which has long been the manufacturing hub for most of the world's smartphone majors, appears to be losing its charm.
The sweeping, overreaching and indefinite lockdowns in many parts of China have crippled production as many have been locked indoors.
This has disrupted supply chains and posed major challenges to retail, logistics and shipment of goods to the US.
The move also comes amidst a global war for semiconductors. The situation has especially been dire for Google which has been marred by long delays to obtain components for some of its devices, according to an employee.
TARIFF WAR
The biggest roadblock for the smartphone companies appears to be the ongoing geopolitical tensions between the US and China.
The move to shift some of its manufacturing capabilities to India could likely be seen as Google's bid to offset any fallout of the tensions.
Many have pointed out that a possible future trade war between the two nations could result in tariffs on Chinese-made goods.
COMPETITION FROM VIETNAM
India could likely be vying for the position with another major contender, Vietnam.
The country has emerged as the favourite for smartphone players to set up base in the country.
Previous reports have also pointed out that Google has been mulling moving some of its Pixel manufacturing to Vietnam.
The Information report also noted that Google could tap into Taiwanese companies such as Foxconn, Wistron and Pegatron to manufacture phones outside China.
The manufacturers could likely deploy their expertise and facilities in countries such as Vietnam and India to realise Google's requirements.
INCENTIVES GIVEN BY INDIAN GOVT
The Indian government's ambitious performance linked incentive (PLI) schemes for promoting local manufacturing are seen as one of the reasons for manufacturers looking to set up base in the country.
The PLI scheme for 'large-scale electronics manufacturing' offers financial incentives for domestic manufacturing of mobile phones and other electronics components in the country.
Apart from this, companies manufacturing in India also have the option to forego the 10% duty mandatory for importing printed circuit boards (PCBs).
IMPACT OF THE MOVE
While Samsung has set up the world's largest mobile handset manufacturing factory' in Uttar Pradesh's Noida to avail the scheme, Apple too appears to have leveraged the scheme to ship 'Made In India' smartphones.
Earlier this year, the union government nudged Apple to develop India as its global base and export fully-built products to the world.
It also asked the tech giant to generate annual production output worth $5 Bn in the next five to six years.
Apple's contract manufacturers, Foxconn and Wistron, are expected to manufacture iPhones worth INR 47,000 Cr in the current fiscal in India. In contrast, the two firms manufactured INR 10,000 Cr worth of iPhones in India in FY22.
CONCLUSION
Earlier this year, Alphabet CEO Sundar Pichai said that Google wants to build more products out of India as part of its commitment to growing business overseas.
The Indian smartphone segment continues to be largely led by Google's Android operating system, which accounted for more than 95% market share at the end of 2021.
This is part of the larger Indian smartphone market which was pegged at $139 Bn in 2021.
This number was projected to grow to $281 Bn by 2028 at a compounded annual growth rate (CAGR) of 10.5%.
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