Global mobile phone and home appliance supply chain suddenly "hijacked" by India

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On March 22, local time, the Indian central government and state governments issued a "lockdown" order to close 75 administrative districts (including the capital New Delhi) severely affected by the epidemic. With the issuance of the ban in India and the suspension of public transportation services in many cities, large companies in India's manufacturing industry also stopped production.

Due to the "lockdown" of 75 administrative regions, local automakers, smartphone manufacturers, consumer electronics companies, home appliance manufacturers and many related companies have been collectively closed until the end of the month. Some of these companies can continue to count their inventory before March 25, but most will remain closed until March 31, which will cause immeasurable losses to the production of key products.

The local production progress of some familiar smartphone and home appliance manufacturing industries, such as Samsung, OPPO, vivo, Haier, TCL, Midea, etc., is likely to be stagnant due to the "city lockdown" ban. The pulse of the global supply chain has suddenly been "stuck" in India since this day.

Smartphone and home appliance industries are the first to be affected

According to Indian media reports, Samsung, OPPO, vivo and other companies have announced the suspension of production and operations in their Noida factories. The report said that the above-mentioned smartphone companies are communicating with government officials in Uttar Pradesh, India, to discuss "future action plans." Noida is located in Uttar Pradesh, the "Indian manufacturing center" near New Delhi. There are about 80 mobile device manufacturing factories in operation, with a total employment of more than 50,000 people.

Currently, Samsung's smartphone production line in Noida has an annual production capacity of about 68 million units; OPPO's factory in Noida's Kasna has an annual production capacity of about 50 million units; vivo's newly built manufacturing plant in Noida also plans to have an annual production capacity of 33 million units.

Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association (ICEA), has said that Noida and Greater Noida are expected to become global hubs for mobile phone and component manufacturing. The association estimates that by 2025, India's electronics manufacturing industry will achieve a production value of $190 billion and produce 1 billion mobile phones, at least 30% of which will be completed here.

"In an extreme scenario, such as a complete shutdown of all factories in all industries for one month, we estimate that the actual manufacturing gross value added (GVA) will fall sharply by 5% in fiscal 2021," said Shukla, chief economist of Mahindra Group in India. He emphasized that this would result in a loss of about US$31 billion in economic value added (EVA) in India's manufacturing industry during the year.

“In the last 20 years, India’s manufacturing growth has declined only in two quarters,” Shukla said.

In addition to smartphone manufacturers, many world-renowned consumer electronics companies and home appliance manufacturers, including Samsung, LG, Godrej, Haier, Panasonic and Carrier Midea, have closed their factories in Pune, Noida, Tirupati and other places in India, some until March 25 and some until the end of the month.

Dixon Technologies, which makes televisions for Samsung and Xiaomi, has shut down until March 31. Company executives said they will wait for government advice and assess the situation before restarting production.

For well-known domestic home appliance brands such as Haier, TCL and Midea, the current production ban has also had a significant impact, especially for Chinese home appliance companies that have just started production. Among them, TCL Huaxing's first project in India just held a topping-out ceremony at the Tirupati TCL Industrial Park (Andhra Pradesh, India) at the end of December 2019. After the project is put into production, it will provide LCD modules to local mobile phone and TV manufacturers in India. The factory originally planned to conduct equipment commissioning in March 2020 and mass production in April.

In addition, in mid-December 2019, Midea Technology Park in Subapalle, Maharashtra, India, also completed the construction of some related factory buildings. These production lines were originally planned to start mass production in April this year, mainly producing refrigerators, washing machines, water purifiers, water heaters and other electrical appliances (annual production capacity of 500,000 units), as well as household air conditioners (annual production capacity of 1.5 million units), air conditioning compressors (annual production capacity of 4.5 million units) and other products.

In addition to the above two companies, Haier may be more affected. Haier Group established its first factory in Pune, India in 2007, and upgraded it to Haier Pune Industrial Park in November 2017. The five interconnected factories of refrigerators, washing machines, air conditioners, water heaters, and color TVs set up in the industrial park will have an annual output of 3.8 million units, and production lines for washing machines, air conditioners, water heaters, and TVs will be expanded in the future. In addition, at the end of March 2019, the groundbreaking ceremony for Haier Group's second industrial park was held in Noida, Uttar Pradesh, India. It is reported that the first phase of the project will be put into production at the end of 2020, and there is no definite construction information for the second phase of the project.

Automobile manufacturing and information service industries were affected

Currently, major automakers such as Maruti Suzuki, India's largest automaker, Hero MotoCorp, India's largest motorcycle manufacturer, and Bajaj Auto have closed their factories in Gurgaon and Pune, and are expected to suspend production until March 31. Mahindra & Mahindra, India's largest tractor manufacturer, closed its Mumbai plant on Monday evening, having previously suspended production operations at its Nagpur production line.

Global automakers such as Fiat and Mercedes, as well as Hyundai, Honda Cars and Indian car and truck maker Tata Motors, also announced production suspensions on March 22.

Honda Motorcycle & Scooter India said on Sunday that it will temporarily shut all four of its plants with immediate effect. "In order to maintain business continuity and support all stakeholders, the company has introduced a 'work from home' policy for all office-based employees, except those who must be physically involved in day-to-day essential operations," a Honda India spokesperson said.

Many new factories and ongoing projects of manufacturing enterprises have been shut down, which has also indirectly affected the local construction industry. In a recent interview with the Economic Times of India, Shah, chairman of the Federation of Real Estate Developers Association of India (CREDAI), said that India's construction industry is almost at a standstill. The industry employs about 8.5 million people and is engaged in about 18,000 real estate projects. "Based on the current assessment, we believe it will take at least a month to resume normal construction work," he added.

At the same time, the information services industry has also been hit. The National Association of Software and Services Companies (NASSCOM) of India said that the ban will have an impact on business process outsourcing services. After receiving a notice from the telecommunications department, many employees of software and Internet companies were told to work from home.

India's BPO industry obviously did not anticipate a total lockdown, so the focus now is not on doing business as usual, but on supporting essential services to local and global clients. This "work from home" transition is ongoing and will take a few days to complete. NASSCOM said: Many outsourcing companies are in the transition phase, but 100% transformation cannot happen, so we have to see the impact of the lockdown order in the coming days.

A week ago, NASSCOM Vice Chairman and Chief Operating Officer publicly stated that the indirect impact of the epidemic on India's IT industry in the medium and long term should never be underestimated. Indian companies need to learn lessons and strive to improve their ability to cope with systemic risks and uncertainties.

No replacement or substitution: only sharing the hardship

“The spread of Covid-19 continues to pose a unique threat to humanity as a whole and is impacting all industries globally,” stressed Mahindra Group Chief Economist Shukla.

"In our view, the focus of government and industry work in the future will be to ensure the health of all partners and ecosystems. The government's advice on closures in some areas will help smooth out fluctuations, which will reduce the pressure on the medical system caused by the further spread of the virus." He also pointed out that the relevant departments will also launch a strong business continuity recovery plan - powered by the next generation of technology to deal with this situation while ensuring the safety of everyone.

The Times of India reported that the suspension of production lines at automobile companies is expected to affect 30% to 40% of the production of passenger cars and two-wheelers in March. The closure of these factories may also have a chain effect on the global parts industry, and many suppliers are currently forced to keep their factories closed until the end of this month.

Before these scenes emerged, how did relevant industry organizations in India view the impact of the Covid-19 epidemic on the global supply chain?

On March 3, local media published an interview with the Secretary-General of the Federation of Indian Chambers of Commerce and Industry. He said at the time: "At a time when China's economy is affected by the COVID-19 pandemic, India should vigorously promote its export products to the world to fill the gap left by China's export obstruction. At present, although India's electronic products, pharmaceuticals, specialty chemicals and automobile production are negatively affected by China's shortage of raw materials, the supply chain of engineering equipment, leather products, agricultural products and carpets remains intact, which can fill the market gap left by the absence of Chinese manufacturers. Data shows that India's commodity exports shrank by 1.93% between April 2019 and January 2020. In the coming months, the brief absence of Chinese manufacturers will create good opportunities for Indian exporters."

The secretary-general also said that even if the epidemic situation improves and China's exports resume, India should continue to strengthen its industrial competitiveness and compete with China for the market, which requires a clearer export strategy.

What we want to say is, don't think about replacement and filling the position first, self-help is the hard truth. The epidemic affects not only one city, one country, or one continent... Under the premise of the era of globalization, people are more closely connected with each other than we think. The connotation of the world's economy, personnel exchanges, and a community with a shared future for mankind are also highlighted. If India wants to create greater value in the global supply chain system, it can only ensure that it is safe before competing for the future market.