[Post-China India]② US-China Conflict...Global Companies' Love Calls Flood In

"We will not put all our eggs in one basket within China."

The rush of global companies heading to India continues. As the US-China conflict accelerates de-Chinaization, global companies are actively moving to establish production bases in India. Companies, having realized the importance of securing supply chain stability through the COVID-19 pandemic, are making efforts to diversify production bases beyond China.

The leading company is the US IT firm Apple. According to major foreign media, Apple's contract manufacturer Foxconn plans to expand the workforce at its iPhone factory in India from the current 17,000 to 70,000 within two years, a fourfold increase. Apple, which had relied entirely on production in China for the past 15 years, has accelerated de-Chinaization by producing from low-cost iPhone models since 2017 to the latest model, the iPhone 14, in India. JP Morgan forecasts that Apple will increase its production share in India from the current 5% to 25% by 2025.

Prime Minister Modi - President Biden Summit This Month... Comprehensive Cooperation

The US's moves to check China have recently become more concrete. Indian Prime Minister Narendra Modi will make a state visit to the US at the end of this month, and at the summit scheduled for the 22nd between President Biden and Prime Minister Modi, ways to strengthen US-India cooperation will be discussed. Although Modi has visited the US several times since taking office, this is his first state visit, drawing attention.

Kim Kyung-hoon, a senior researcher of the India-South Asia team at the Korea Institute for International Economic Policy (KIEP), said, "To curb China's rapid rise, the US is engaging in comprehensive cooperation with India, and US companies are actively entering India. For example, US defense contractor GE Aerospace has entered India to jointly develop jet engines. The US and India are strengthening strategic technology partnerships in defense, space, and other fields, and this summit will further solidify bilateral relations."

Domestic companies are also turning their eyes to the Indian market. Samsung Electronics withdrew from its China factory early and operates the world's largest smart factory in Noida, near New Delhi, India's capital. Hyundai Motor Group is a company recently accelerating its India strategy. India is the third-largest automobile market in the world after China and the US. Hyundai Motor Group holds the second-largest market share (21.1%) in India, following Maruti-Suzuki (41.3%). Kia produces 300,000 units annually at its Anantapur plant, and Hyundai plans to expand production in India by acquiring General Motors (GM)'s Indian plant. LG Electronics also plans to increase investment this year to expand premium home appliance production capacity at its Noida and Pune plants in India.

Trade Surplus with India Ranks 41st 20 Years Ago → 4th Last Year

According to the Korea International Trade Association, Korea's trade surplus with India from January to April this year was $3.672 billion, ranking 4th after the US ($10.8 billion), Vietnam ($7.6 billion), and Hong Kong ($5.4 billion). The trade surplus with India ranked 5th from 2019 to 2021 but jumped one notch to 4th last year. Considering that 20 years ago in 2002, the trade surplus with India was only $13.5 million, ranking 41st, this is a remarkable achievement. Last year's top export items to India were steel plates ($673 million), synthetic resins ($615 million), semiconductors ($610 million), and auto parts ($446 million). Jang Sang-sik, head of the Trend Analysis Office at the Trade Association, explained, "While exports of semiconductors to India decreased due to price declines, the export growth rate of auto parts was high. It seems that auto parts exports increased as Hyundai and Kia performed well in India."

Although Korean companies are actively knocking on India's door, Korea's market share in India is not high. From January to April this year, Korea's share of India's total imports was 3.16%, significantly lower than China's 14.00%. This also means there is much room for growth. Kim, the senior researcher, said, "In the medium term, most durable goods consumption expenditure growth rates in India are expected to be higher than before the COVID-19 pandemic, especially consumption growth in automobiles, mobile phones, and medical devices is expected to be prominent. If Korea does not actively target the Indian market, where the US, China, and Japan are rushing in, it will miss out on a huge consumer market later at a higher cost."

The Indian government is accelerating its manufacturing-centered growth strategy by offering production-linked incentives (PLI) and tax benefits to companies relocating production facilities from China to India to attract foreign direct investment (FDI). India actively supports domestic companies for industrialization. For newly entering industries such as semiconductors and renewable energy, Indian companies are favorable to establishing cooperative relationships with global manufacturers to secure technology and funds, so experts advise Korean companies to prepare joint ventures and collaboration plans with Indian companies. In particular, considering the geopolitical changes that have made the semiconductor industry a strategic industry and the expected significant expansion of domestic consumption of durable goods equipped with semiconductors, the Indian government decided to allocate the largest PLI budget to this industry.

Choi Won-ki, professor of the Asia-Pacific Research Department at the Korea National Diplomatic Academy, said, "Among various advanced manufacturing industries, India strongly hopes for cooperation with Korea first in the semiconductor field, and hopes Samsung and others will pursue additional investment attraction and technology cooperation. In defense cooperation, Hanwha Defense's K-9 self-propelled howitzers have been introduced, with 100 units deployed in the Himalaya Ladakh region confronting China. There is also interest in Daewoo Shipbuilding & Marine Engineering's submarines, so cooperation fields are diverse not only in defense but also in maritime security and the blue economy."