India Is Involved In The "World Factory", And China Is Facing A Crisis.

In recent days, Apple's manufacturer and manufacturer jointly established factories in three countries: India, Indonesia and Vietnam.

In recent years, many manufacturing companies began to build factories in India, and millet, OPPO and vivo have all built factories in India, and are still expanding.

There are many reasons for this, and the most important thing is tariff, market and cost.

First, the India government initiated tax reform, announcing a 10% tariff on electronic products such as smart phones.

The most direct feedback is to stimulate the global mobile phone manufacturers to accelerate the pace of building factories in India.

In addition to mobile phone manufacturers, many technology giants are starting to invest and build factories in India.

Earlier, Foxconn group has signed an agreement with the local government of India and will invest $5 billion to build factories in India.

Today, Foxconn has several factories in India, citing foreign media sources, saying that Foxconn will be ready to produce mobile phones such as iPhone in India.

Earlier, China's home appliance maker Mei announced at the end of 2018 that it plans to invest 13 billion 500 million rupees (about 1 billion 280 million yuan) in India to build a factory in the western city of Pu to produce products locally.

The new factory is located near the city of PU, and has a science park.

The plant may start commercial operation in early 2020, and the technology park is expected to create employment opportunities for more than 2000 people directly and indirectly.

In 5 years, the factory will produce refrigerators, air conditioners, washing machines, water purifiers, water heaters and compressors.

Samsung's layout is relatively early. As early as June 2017, Samsung announced that it would invest 700 billion won (about 4 billion 265 million yuan) to increase the capacity of mobile phones in India's factory. It was said that the target was to increase the monthly capacity of mobile phones to 10 million in 2018, and the capacity of refrigerators to 200 thousand.

Although there is still a certain gap between the target and the target, the capacity of the Samsung India plant has now reached 5 million.

Chinese mobile phone brands such as OPPO, vivo, Jinli, Lenovo, millet and other companies have taken root in India's manufacturing industry. The competition for mobile phone manufacturing in India has been fully opened.

"At present, there are nearly 100 mobile phone related enterprises in India. In the next 3-5 years, mobile phone core components manufacturers will gradually migrate to India, and the India mobile phone industry chain has taken shape."

In the view of Yang Shucheng, Secretary General of India China Mobile Enterprise Association, India is likely to become a new manufacturing base after China.

As early as four years ago, China's mobile phone industry, including brand dealers, business representatives, accessories suppliers (batteries, chargers), packers, materials suppliers, and so on, began to enter India in succession, and was welcomed by the local community.

In addition to the mobile phone manufacturing industry's scrambling to build factories in India, the auto industry is also entering the industry.

Last year, SAIC was planning to build its first India plant, and SAIC would also be the first Chinese car company to enter India.

In fact, as early as 1995-2000 years, Korea modern, the United States Ford, general motors, Japan Honda, TOYOTA and other automobile factories have begun to produce cars in India factory.

After 2000, the India government cancelled the number of imported cars and the upper limit of foreign capital.

This allowed 100% of foreign auto companies to become possible in India, and at the same time attracted traditional car manufacturers to compete for India.

Why are mobile phones, household appliances and auto makers rusing to build factories in India?

What competitive advantages will India bring to them?

There is no denying the fact that India has been at the forefront of the world's lowest labor cost. Labor cost has always been regarded as the main advantage of India as a manufacturing base.

For labor-intensive manufacturing industries, India is undoubtedly the best manufacturing base with a population of 64% below the age of 35.

Moreover, India's population below the age of 25 reaches 598 million, which can guarantee enough labour force in the next 20 years.

Cheap and abundant labor force also ensures the low production cost and competitiveness of mobile phone companies to a certain extent.

At present, India's per capita national income is only $1590, while the coverage of mobile phones is less than 20%.

For a country with more than 1 billion people, it means 800 million of the market gap, and this includes upgrading.

With the continuous development of India, per capita income continues to increase, which means that the market growth in the future will be very impressive.

The pursuit of India made by car manufacturers is relatively weak compared to mobile phones.

The main reason is that the consumption power of India is insufficient.

Take India's first automobile brand as Tata Group, for example, the sales price of its hot car Tata Nano is only 100 thousand rupees (about 9 thousand and 700 yuan).

As one of the most populous countries in the world, the potential of the India market is beyond doubt.

More importantly, India's domestic mobile phone and auto market is still in a relatively backward state.

In such a market, car manufacturers can only reduce their manufacturing costs through cheap labor force in the short term, but in the long run, the brand of India will not be able to meet the needs of users sooner or later.

In addition, after evading 60%-100% tariffs, car brands will gain more regulatory space in product prices.

According to research data from the Boston Consulting Group, the cost of "made in China" is close to the US.

The report analyzes the top 25 economies in the world, taking the US as the benchmark (100), and the manufacturing cost index of China as 96. In short, it is the same product, and the manufacturing cost in the US is US $1, then it needs us $0.96 in China.

One is that the wages of Chinese workers have increased, and China's salary increase has reached 187% from 2004 to 2014.

The two is the exchange rate. From 2004 to 2014, the exchange rate of RMB against the US dollar increased by 35%.

The three is the cost of energy. China's electricity consumption rose from US $7 / kwh in 2004 to US $11 / kwh in 2014, while the cost of natural gas rose from 5.8 US $1 million to 13.7 US dollars, or 138%.

Since the reform and opening up, the proportion of China's manufacturing industry in the world has increased from less than 2% to over 20%. The main reason for this miracle is the low cost advantage.

In 1978, the monthly salary of China's labor force was only 3% of that of the United States, and also significantly lower than that of Thailand and other Asian neighbors.

By 2015, China's labor monthly wages reached 20% of the United States, 145% of Thailand.

Cheng Hong, Dean of Quality Institute of Wuhan University, said.

But this is not the latest trend. It began to appear a few years ago, especially in China's shoe making and clothing industry, which has migrated to Vietnam, Indonesia and even Bangladesh.

The rise in manufacturing costs prompted China to gradually shift to high-end manufacturing.

Prior to this, IDC global robot research director Jing Bing Zhang and Drew Rodriguez have unanimously recognized China's strength in advanced manufacturing.

Jing Bing Zhang believes that as the value of Chinese manufacturing increases and workers' wages rise, low-cost manufacturing is gradually being squeezed out.

Michelle Drew Rodriguez, co-author of DDT's global manufacturing competitiveness index in 2016, said: "ten years ago, China was not affiliated with the high-end technology manufacturing industry. Now China has the fastest computer in the world, and even defeated the National Laboratory of the United States."

Judging from the current situation, the development of India's manufacturing industry relies on simple assembly, more like the "world wage earners" and far from the "world factory".

But China has lost the advantage of cheap labor. If we can not rapidly improve the capability of "intelligent manufacturing", we will be closer to the crisis than India.