South Korean tech giants are shifting their production operations away from China to India to lessen the damage from the lingering uncertainties surrounding the US-China rivalry and to tap further into the world's fifth-largest economy.
Samsung Electronics, the world’s largest smartphone maker in terms of shipments, has recently decided to produce the latest Galaxy S23 flagship smartphones in India for local sales – an unprecedented decision considering India had long remained its manufacturing base for feature phones or lower-end smartphones.
“The initial quantities of our previous flagship models had been produced in Vietnam and exported to India,” a Samsung official said on condition of anonymity.
“The new Galaxy S23 phones will be produced (in India) and supplied locally. It’ll be the first case for us to manufacture the initial supplies there.”
Samsung has been operating the world’s largest mobile manufacturing plant in Noida, which is backed by the Indian government’s tax benefits. In the burgeoning market, however, Samsung has remained the No. 2 smartphone maker after China’s Xiaomi since 2018.
During a press conference held last week in San Francisco following the Samsung Galaxy Unpacked 2023 event, Samsung’s mobile experience division head Roh Tae-moon said, “Our goal is to recapture and secure the No. 1 spot in India.”
The tech titan is also set to invest around 260 billion won ($205.7 million) into a new factory to manufacture major parts such as refrigerator compressors, in addition to its Chennai plant that produces home appliances and TVs. The factory’s annual production capacity is projected at around 8 million units.
Samsung’s crosstown rival LG Electronics is also betting on India to fuel its growth. The tech firm has home appliance production plants in Noida and Pune in western India. Recently, Korea's No. 2 home appliances maker invested around 30.4 billion won to expand its production lines for premium two-door refrigerators.
With an annual goal of manufacturing 200,000 premium refrigerators there, LG has set a target of 25-30 percent growth in the Indian home appliance market this year, the industry sources said.
Both Samsung and LG are eyeing opportunities in India, a country they hope can serve as a global production base and consumer market, while China has shown signs of the economy bottoming out. It also comes as India has become Korea’s fourth-largest trading partner last year.
S&P Global predicted in its November report that India will grow at an annual rate of 6.3 percent on average from 2021 to 2030 and become the world’s third-largest economy, surpassing Japan and Germany. The United Nations also forecast that India will become the world's most populous nation sometime this year, overtaking China.
The deepening US-China rivalry is another reason for India’s rise. Other global companies have also moved their production bases to India from China.
Apple has started moving its iPad production line to Noida to reduce its reliance on China. JP Morgan further forecast that the company will likely move about 25 percent of iPhone production to India by 2025. Google’s parent firm Alphabet is moving some of its production lines for Google’s Pixel phones to India as well.
The Bank of Korea suggested that Korean companies seek entry into the Indian market given its high growth potential.
"There is a possibility that the relocation of production bases to India, centered on US companies, will be accelerated along with the negotiations on the free trade agreement between India and the US, as well as the US government's tax incentives for companies leaving China," the bank said in a statement Sunday.