India’s quiet push to steal more of China’s iPhone business

Parts of Tamil Nadu are already working as industrial champions. A long belt of car and car-part makers stretches down the coast from its capital Chennai. In the western Coimbatore valley, factories specialise in die-casting and pump manufacturing. There is a knitwear cluster in Tiruppur, and the country’s biggest maker of matchsticks is in Sivakasi.

It is striking that India is plunging into such high-end goods as the iPhone. India has never become internationally competitive making things such as T-shirts or sneakers, getting its clock cleaned by smaller and formerly less developed countries like Bangladesh and Vietnam.

This is not the first time this century that India was expected to move up the ranks of high-value electronics manufacturing. Nor the first time that Tamil Nadu seemed like the best launch pad for it. In 2006, Finland’s Nokia, then a cellphone colossus, built a big factory at the center of Sriperumbudur’s government-planned industrial estate. It was supposed to make millions of phones a year, for India and the rest of the world. The smartphone, and the global financial crisis in 2009, knocked down those dreams.

But the roots never died. Sriperumbudur was initially attractive because of its experience in auto manufacturing. Hyundai had set up shop in 1996, soon after India opened up its economy to more foreign investment and Tamil Nadu formed its first state development agency. Glassmaking and basic electrical goods followed.

After a lull, the old Nokia site was built over by Salcomp, a local firm that makes high-end power chargers, now for companies like Apple. The plants of a dozen other known and rumoured Apple suppliers have sprouted around it, along with Samsung, Dell and most other big multinational electronics companies.

On Friday, India’s Republic Day, Foxcon chief executive Young Liu was in New Delhi to be awarded the Padma Bhushan, the country’s third-highest civilian honour. “Let’s do our part,” he said, “for manufacturing in India and for the betterment of society.”

In India and abroad, there is no shortage of excitement about the prospect of India’s supplanting China in at least some part of global supply chains. By last year, Apple chief executive Tim Cook was showing up in India with his palms pressed in namaste and a vermilion mark on his forehead, inaugurating the country’s first Apple stores.

All told, more than 130 Fortune 500 companies are doing business in Tamil Nadu.

Dr Rajaa isn’t stopping at $1,000 smartphones, either. He and other officials in Tamil Nadu are trying to attract more businesses making cheaper things, too, in greater volume. If the rest of the country could follow Tamil Nadu, India might be able to produce enough of the less-skilled jobs its young and growing population needs.

Dr Rajaa spent the first week of January regaling foreign investors with plans that included a budding new industrial cluster, focused on non-leather footwear. About 220km south of Sriperumbudur, Nikes, Adidas and Crocs are just starting to roll off the lines in Perambalur. NYTIMES

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