why is it difficult for industrial parks to settle in india?
2024-09-30
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many indian media have recently reported that foxconn is evaluating several states in southern india and hopes to choose a suitable place to establish an industrial park. at the same time, relevant "alternative states" are also making efforts, hoping to win this competition. various states have stated that they plan to build dormitories, hospitals, fire stations, cinemas, supermarkets and other supporting facilities for the park, striving to build the park into an area where companies, workers and their families can live and work in peace and contentment.
however, judging from india's current conditions, it is not easy to achieve a win-win situation for enterprises, industrial parks, local governments, and local workers.
foxconn's first attempt to set up an industrial park in india was in 2006. at that time, foxconn had set up two mobile phone production parks in tamil nadu, mainly manufacturing nokia mobile phones. later, the industrial park was closed due to declining brand sales.
in 2014, indian prime minister narendra modi proposed the "made in india" campaign, hoping to use preferential policies to attract foreign investment to build factories, complete parts production and assembly in india, and promote the development of the country's manufacturing industry. the following year, foxconn once again set its sights on india. in august 2015, foxconn announced plans to build a factory in india, mainly to produce apple iphones. its subsidiaries will also provide services for many other mobile phone brands, but it still ended in failure.
if the first industrial park investment failed and the blame could be thrown to nokia, which had a lower market share that year, then there would be less excuses for the second failure. even many experts in india did not expect that neither apple nor foxconn could avoid the fate of "waterloo" in india. although foxconn india's order volume did increase, the increase was much lower than market expectations. to make matters worse, in november 2016, the indian government announced the abolition of high-denomination banknotes. a severe cash shortage caused foxconn's revenue in india to plummet by 50%. at present, although foxconn claims that it "has not given up on the indian market," the industry generally believes that this is just an implicit statement of "wait and see."
previously, the wall street journal published an article stating that apple plans to transfer 25% of global iphone production to india by 2025. many analysts are optimistic about the indian market based on this. however, as of the end of 2023, india only accounts for 14% of apple's total manufacturing business, which is far from the 25% target. many institutions have begun to adjust their judgment on this target, saying that "realistic factors make it difficult for foxconn to 'bet' on india."
in fact, india is not as integrated with international standards in terms of corporate culture, worker quality, business environment, and infrastructure level as imagined. there is also considerable resistance to internal reforms, and it is still far from being a major manufacturing country in the world.
on the surface, labor costs in india are relatively cheaper, and it should be easier to make money by opening a factory in india. however, due to different corporate cultures, it usually takes a long time for foreign-funded enterprises and local indian labor forces to work together, which is not only time-consuming and labor-intensive, but also has worrying results. for example, foxconn sent people to india to train local workers. this makes many indian workers dissatisfied and believe that this management method is not suitable for india. some indian managers complained that due to language barriers, a large number of documents, rules, and software interfaces caused considerable difficulties to local employees in india.
the existence of these differences has resulted in foxconn's indian factories having lower labor costs, but lower work efficiency and lower work quality. in order to meet the order requirements, foxconn had to decide to only let indian factories be responsible for relatively simple work with a long construction period, while orders that needed to be "rushed" were handed over to factories in other regions.
insufficient supply chain is also a more difficult problem. currently, india does not have a complete mobile phone industry chain supply chain, and most parts need to be imported, which means higher logistics costs, customs clearance costs, and a lot of time costs. some experts commented that in india, high hidden costs offset the attraction of low labor prices.
in addition, the low level of infrastructure in india has also greatly reduced the interest of foreign-funded enterprises in investing in india. for example, india's current power supply capacity is difficult to meet industrial demand. this summer, in the face of rare historical high temperatures, the indian government temporarily issued a corporate "power rationing order" requiring a number of companies, including foxconn, to reduce production electricity consumption by 30%. this has caused a huge blow to corporate production capacity. market analysts believe that the "power restriction order" alone will make foreign-funded enterprises make more cautious choices.
in fact, when foreign-funded enterprises invest in india, there are still a lot of "small problems" and "minor frictions" that are difficult to resolve through communication. foxconn’s failure to “set foot” in india was not without reason. (source of this article: economic daily author: shi puhao)
