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New Delhi: India’s electronics manufacturers are keenly watching the outcome of the US presidential election, hopeful that the next administration imposes stricter tariffs on China amid an ongoing trade war between the two countries. Some are privately hoping for a return of Donald Trump in the White House for his campaign promise to bring exempted goods like laptops and smartphones on the list of items that now attract 25% anti-dumping tariffs on import from China. This, in the hope that a large chunk of production would then shift to other regions as a result of Chinese exports becoming more expensive for electronics brands.
Advt Experts believe if the US toughened its stance on China, India would become a favourable base alongside Mexico and Vietnam due to its large labour base and the government’s policies to boost domestic manufacturing. A support package to build an electronics component and sub-assembly ecosystem is expected to be passed by the Cabinet later this year, strengthening India’s case to attract production shifting away from China. Trump has vowed to increase tariffs to a steep 60% on goods imported from China if he comes back to power.
His opponent Kamala Harris is expected to continue the current tariff regime against China which has remained unchanged under the Biden administration. Notably, laptops and smartphones, two items which the Indian electronics industry is focusing on, are exempt from the 25% tariff currently imposed on Chinese imports to the US. “Today, China exports $50 billion worth of IT hardware.
If tariffs are now imposed, where will the big players then go? Vietnam is also under the US radar as an extension of China. Plus they are a small country, and will not probably be able to take the load. They will come to India because of the large opportunities.
They will go to Mexico because of the close proximity to the US,” an industry executive in the manufacturing space told ET on the condition of anonymity. Advt India already has the capacities in place, access to capital and favourable policies, and is in the process of imparting the technical skills required to attract investments from China, the executive said. “The China Plus One phenomenon is not the whims and fancies of the industry.
It is happening. It is real, and it’s only going to explode whether Trump comes to power or not,” the executive said, adding that this is something China also understands, and companies there are therefore keen on expanding out to other regions including India. China’s largest original design manufacturers (ODMs), which design and manufacture a large chunk of the world’s smartphones and laptops, are setting up base in India.
Chinese ODM Longcheer has signed a partnership with Dixon Technologies , India’s largest electronics contract manufacturer, providing product design expertise to the local company. Longcheer controls about 28% of all ODM production globally. Micromax parent Bhagwati Products is in the final stages of cutting a deal with Huaqin, China’s largest ODM.
The Chinese company is set to come to India as a minority stakeholder, providing technical support to Bhagwati. Apple, which has the largest share of electronics exports from India, is prioritising building out a supply chain ecosystem in India, with a key focus on iPhone, the company’s largest revenue spinner, said brokerage firm JP Morgan. “iPhone EMS production in India currently contributes only around 10% of total new iPhone model output and has progressed a bit more slowly than our expectations in Sep 2022.
Nevertheless, activity remains strong, and we expect EMS production from India to reach 20-25% of total units by 2027, driven largely by Hon Hai ( Foxconn ), Pegatron and local vendor Tata Electronics,” JP Morgan said. The shift is happening despite iPhone assembly margins being lower in India than in China due to a lower scale and early stages of the learning curve. “Our research indicates that iPhone casing production is eventually likely to increase in India with Hon Hai and local vendors.
In the mid- to long term, we believe other component suppliers, such as PCB and connectors, will follow suit. However, the component ramp-up is likely to be a slow process, given the higher degree of skilled operators required and the more consolidated operating model. To capture the shift in the tides, industry association India Electronics and Cellular Association (ICEA) has urged the government to engage with the US on products where tariffs have not been imposed, which include laptops and tablets, smartphones, chargers, lithium-ion batteries and USB cables.
“The US government can prevail upon their companies to shift at least 50% of the global production (to India) in view of the great strategic partnership which has got established,” ICEA said in a letter to the Ministry of Electronics and Information Technology in December 2023. India’s contribution to electronics imports to the US increased to 2% in the January-September period in 2023, compared with 0.3% in 2018, ICEA said.
By Subhrojit Mallick , ET Bureau Published On Sep 23, 2024 at 07:20 AM IST Telegram Facebook Copy Link Be the first one to comment. Comment Now COMMENTS Comment Now Read Comment (1) All Comments By commenting, you agree to the Prohibited Content Policy Post By commenting, you agree to the Prohibited Content Policy Post Find this Comment Offensive? Choose your reason below and click on the submit button. This will alert our moderators to take actions REASONS FOR REPORTING Foul Language Defamatory Inciting hatred against a certain community Out of Context / Spam Others Report Join the community of 2M+ industry professionals Subscribe to our newsletter to get latest insights & analysis.
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