A mobile phone reflects the great power dream of "Made in India" and the globalization of "Chinese factories"

If Indians don’t work harder, Mumbai will be surpassed by Shanghai. Although Mumbai’s GDP is only half of Shanghai’s, in the eyes of Indians, this is not just a joke, but an ironclad fact.

However, an obvious reality is that although India has been aiming at China and trying to catch up, China, which has already achieved "catching up with the United States and surpassing Britain", has only one goal - to achieve the great rejuvenation of the Chinese nation.

Indian Prime Minister Modi has put forward an election manifesto of building a "New India", creating an investment-led growth model, and proposing to develop India into the world's third largest economy by 2030, with a GDP exceeding US$5 trillion by 2025 and exceeding US$10 trillion by 2032.

In recent years, India's industrialization seems to have fast-forwarded, with its GDP ranking fifth in the world. In general, India has established a certain industrial system, with pharmaceuticals and automobiles being its most competitive fields, and its energy, textiles, food, precision instruments, software manufacturing, aviation and other fields also developing rapidly.

The arrival of the "black swan" COVID-19 pandemic has put the transfer of the industrial chain on the agenda. At the same time, New Delhi sees the United States as an opportunity and vigorously promotes US-India trade. Relevant research reports from the two countries have proposed joint efforts in 13 areas. India also hopes that the United States will restore its "Generalized System of Preferences" to facilitate the export of its products to the United States. I wonder what chemical reaction will occur when "America First" meets "Made in India".

The epidemic has dealt a huge blow to the Indian economy, and "saving the market" has become a top priority. This time, the Indian government has invested $6.65 billion directly in the mobile phone manufacturing industry, with the goal of building India into the world's smartphone manufacturing center.

India has this potential. In 2018, India replaced Vietnam and became the world's second largest mobile phone manufacturer after China.

Research company Statista has predicted that India's global smartphone market share will reach 15% in 2019, while China will continue to maintain its dominant position with a current market share of 31%. Apart from China, India is the world's largest smartphone market, but product demand and industry development are extremely different. Unlike my country, which has entered the 5G era, India is still in the era of smartphone popularization. According to data from research firm IDC, India shipped 323 million mobile phones in 2018, of which smartphone penetration was 24%. More than 30% of Indians have not yet popularized mobile phones. Ideally, India will have a smartphone market of 1.028 billion people.

With a huge potential market, abundant cheap labor and a bright spot in the Indian economy over the past six years, India's ambition to become a smartphone manufacturing hub seems quite logical.

However, ideals need time to be polished and take shape.

The road to advancement of Indian smartphones

2007 was the heyday of Nokia. India also began to embark on the road of pioneering the mobile phone industry. The perfect combination of Indian copycats and China's Shenzhen Huaqiangbei supply chain officially entered the history of Indian industry. In December of the same year, Modi, who was born in a tea vendor family, won the local election in Gujarat, which was one step closer to him entering the presidential palace in New Delhi seven years later.

In 2014, the 4G era made Chinese smartphones flourish, and Chinese manufacturers brought this spring breeze to the South Asian continent. In the same year, Modi came to power and proposed "Make in India" and liberalized investment attraction. This year, Indian brands gradually declined, and Chinese brands successfully seized the Indian market. At this time, there were only two local Indian brands left. In the fourth quarter of 2017, Xiaomi surpassed Samsung to become the top-selling mobile phone brand in the Indian market. The following year, Chinese manufacturers' share of the Indian smartphone market reached 60%.

Driven by Chinese manufacturers, the Indian smartphone market shipped 158 million units in 2019, a year-on-year increase of 7%. At the same time, the localization of Indian mobile phones is also continuing to advance. There are 268 local manufacturers in India, and 95% of domestically sold mobile phones are produced in domestic factories. In the first quarter of 2020, even though it was affected by the epidemic, Indian smartphone shipments were still dominated by Chinese brands, with Xiaomi, vivo and OPPO ranking first, second and fifth, and Samsung only third.

In the era of economic globalization, foreign advantageous industries can easily affect other countries' primary industries. The Indian mobile phone industry is a mirror. In order to improve localization, the Indian government has gradually increased the mobile phone tax rate to 20% in the past two years. Under this policy, Chinese companies such as Xiaomi, Lenovo Group, Huawei, OPPO, and vivo have invested in and built factories in India, but the Indian mobile phone manufacturing industry still cannot get rid of the shadow of China.

Especially in the field of components, India has always lacked an ecosystem of component manufacturers, and its assembly still relies on components imported from China. The Indian government has realized this problem and has passed a resolution called the Phased Manufacturing Plan (PMP), which imposes tariffs on key smartphone components in stages to restrict the import of components and make them localized. It is worth noting that Indian manufacturing companies have already started the assembly of circuit boards, which accounts for 60% of the cost of mobile phones.

Weak purchasing power

Although there has been a trend of "deleting Chinese apps" recently, it is still difficult for Indians to replace their Chinese mobile phones.

Even if India becomes the global mobile phone manufacturing center, it is difficult to get rid of China's shadow. In addition to the restrictions on technology and equipment, the most critical factor is the consumption capacity of Indians themselves. As for exports, India thinks too much.

Where production is, consumption is there. This is a continuous process of supply chain evolution and diffusion. Whether it is mobile phone manufacturing or automobile production, this economic law applies equally. After all, investing in a factory in any country or region is aimed at the purchasing power of that region.

At the beginning, I mentioned that mobile phones and smartphones are not popular products for Indians, and the Indian market has great potential. However, the purchasing power of Indians varies. The average monthly income of Indians is 600 to 700 yuan, and the hot-selling models are mainly cheap mobile phones below 200 US dollars. Improving purchasing power is not a matter of overnight.

Under the nearly two-month lockdown, India's economic development has almost come to a standstill. Under the epidemic, India's economy has experienced a "collapse-like" decline, with nearly 200,000 people infected with the new coronavirus and 122 million people unemployed. Current consumption is also mostly concentrated on necessities such as food.

In fact, if India wants to become a global foundry, its neighbors can provide a market so that foreign parts suppliers and mobile phone manufacturers can accelerate localization. In contrast, the advent of the 5G era has brought a new round of market innovation to China. By 2025, driven by 5G, it is predicted that the scale of China's mobile phone products and services market will reach 1.15 trillion yuan.

Lost time and the pain of history

Both China and India are pursuing a combination of planned economy + market economy. The core of this system is to concentrate limited resources on industrial development, which means investing as much output as possible in industrial reproduction, thereby achieving rapid industrial development and continuously improving the industrialization system. However, the premise of all this is that the country has the ability to coordinate the planning of the entire national economy.

India's history and national conditions make it difficult to support this capability. India was born under the rule of the British colonial government and is currently a federal country. Each state has its own tax system, which means that any goods entering or leaving the state are subject to tax.

Under the condition of state autonomy, a large number of state leaders are still skeptical about industrialization, which is directly reflected in infrastructure construction. The most critical foundation of industrialization is transportation, and the transportation industry is the basis for the smooth development of industrialization. Developed transportation is likely to bring about the free flow of population and competition between states, so the control of autonomy will naturally decrease, and many states do not support the development of transportation. This also explains why Japan is full of confidence in building high-speed railways in India but has not made any progress.

India has a large number of cheap laborers, which is considered the biggest advantage that threatens "Made in China". However, the pillar of India's economy is the service industry, which accounts for more than 50% of its GDP. A large part of the labor force is exported to the European and American markets. In other words, India's service industry is mainly an export-oriented market, not supporting India's own development. In addition, about half of India's labor force is still absorbed by agriculture.

In short, regardless of the quality of the workforce, the proportion of Indian laborers in the country's manufacturing industry is not high. Moreover, India is still dominated by small workshops, and small factories with less than 50 people absorb 84% of the manufacturing workforce.

At the same time, perhaps due to the influence of its colonial history, India suffers from a serious loss of high-end educated talent, with an annual loss of up to $2 billion. Since the 1960s, India's outstanding young professional and technical personnel have begun to flow to the West in large numbers, and it has been 40 years to this day. Even the engineers who stayed behind find it difficult to integrate into the work of low-end mobile phone manufacturers due to the gap between the rich and the poor and the hierarchy. Only a group of employees with poor organization and hands-on ability are left working on the assembly line, which is why India's technology development is slow.

It takes patience to cultivate the market, and it also takes time to build a capable workforce, not to mention the obstacles of poorly revised labor laws. India's labor laws are jointly managed by the federal government and local governments. Whether the states are friendly to capital has become the key to the reform of this set of laws. At the same time, India's trade unions are powerful, which, from a certain perspective, will hinder the effective operation of the modern management system.

As a result, India's business environment is not so friendly. India ranked 100th in the World Bank's 2019 Doing Business Report, which surveyed 190 economies. India's ranking in the ease of starting a business was even lower, at 156th.

Today, international giants such as Samsung Electronics, Xiaomi, OPPO and vivo have been injecting funds into India to increase the production capacity of mobile phone assembly plants. At the same time, India is also trying to offer relatively favorable conditions to attract multinational companies such as Apple to move their production lines to their own country. Apple has planned to move 20% of its iPhone production capacity from China to support India's manufacturing industry, but the obstacle is that India's labor capacity and infrastructure have not yet reached a satisfactory level.

The prospect of India's industrialization is far less dazzling than it is portrayed to be, but it must be said that although the legacy of India's history makes it somewhat unrealistic compared to modern civilization, Modi is indeed a leader with a strategic vision. Even if he is a bit radical, he also conforms to the development trend of the global economy.

India has always had a "dream of a great power". During the epidemic, this is more like an inspiring slogan, encouraging the Indian people to revitalize the Indian economy. India's grand plan to become the global mobile phone manufacturing center will have to rely on foreign manufacturers to achieve it for a long time in the future.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.