Among Production Bases, to India
India Ranks 4th Among Domestic Trade Surplus Countries
Benefiting from US-China Conflict Spillover
[Asia Economy Reporter Han Yeju] Samsung Electronics and LG Electronics are shifting their production bases from China to India. This move reflects the trend of the 'world's factory' changing due to the impact of US-China conflicts, rising labor costs in China, and production disruptions caused by stringent COVID-19 quarantine measures. Companies that need to reduce their trade dependence on China expect the Indian market to serve as a powerful lever.
Since 2021, Samsung Electronics has been actively increasing its production share in India. Currently, Samsung operates the world's largest smartphone factory in Noida, near New Delhi, India, and produces home appliances and TVs in Chennai, a southeastern coastal city.
Near the Chennai home appliance factory, Samsung plans to invest approximately 260 billion KRW to establish a new factory producing key components such as refrigerator compressors. The annual production scale is expected to reach 8 million units. The plan is to increase production volume and speed by locally sourcing not only finished products but also components.
The recently launched 'Galaxy S23' will be 100% produced at the Noida factory in India. Until now, Samsung's Indian factories in Noida and other locations have produced feature phones and mid-to-low-end A and M series smartphones. Through a stable supply chain, Samsung aims to become number one in India, which has grown into the world's second-largest smartphone market, surpassing the US. The foldable smartphones 'Galaxy Z Fold5' and 'Z Flip5,' scheduled for release in the second half of the year, are also expected to be produced in India.
LG Electronics has home appliance production factories in Noida and Pune, located in the western region. Recently, LG invested about 30.4 billion KRW to expand the premium double-door refrigerator production line in Pune. The goal of this new line is to produce 200,000 premium refrigerators annually. Additionally, LG aims for 25-30% growth in the Indian home appliance market this year.
Concerns among global manufacturers about 'Peak China'?meaning China's growth has reached its peak?are turning into opportunities for India. India's rapid rise in the global economy is remarkable. Surpassing China to become the world's most populous country, India is expected to maintain high-speed growth exceeding 6% for three consecutive years through this year. As a result, India’s attractiveness as both a production base and a consumer market has increased, ranking fourth among countries with a trade surplus with Korea last year, following Vietnam, the US, and Hong Kong.
The increased political uncertainty caused by US-China conflicts is also raising India's value. Global companies are already relocating production bases from China to India. Apple, which suffered significant production disruptions due to China's COVID shutdowns, is moving its production base to Noida. JP Morgan has predicted that 25% of iPhones will be produced in India by 2025. Apple is also considering moving its iPad production line from China to India. Foxconn, Apple's contract manufacturer, announced plans to quadruple its workforce at the Indian iPhone factory from 17,000 to 70,000 within two years. Foxconn established a factory in Tamil Nadu, southern India, in 2019 and has been producing some 'iPhone 14' models since last year.
The Bank of Korea stated, "With upcoming free trade agreement (FTA) negotiations between India and the US, tax incentives from the US government for companies moving away from China, and other factors, the relocation of production bases to India, especially by US companies, is likely to accelerate." It added, "In preparation for India's high economic growth, active entry into the Indian market should be pursued."
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