(Chinese Version)

Reports have it that Xiaomi has expanded its business into Indian while its manufacture cooperator Foxconn has developed its branch in India as well. Guo Taiming, the CEO of Hong Hai Group, announced that he would build more than 10 foundries in Indian and hire at least one million workers. If Guo’ promise pans out, that would probably cost him 3.5 billion dollars. Even though Guo is approaching his 70s, he is still quite bold in his investment and this time India becomes his target. Meanwhile, Hua Wei has gained the permission to build its manufacture center in India. It seems that all of a sudden India becomes a hot spot for every Chinese manufacturer.
Since the beginning of 2015, the manufacturing industry in China has been going through a hard time. A lot of factories along China’s east coast shut down. Once in a while, news about reductions of manufacture workers would be discussed. Coincidentally, developed countries such as Germany and the United States have ungraded their industry level to 4.0. It is impossible for China to copy their achievements in a short period of time while in the lower market, India, Indonesia, Vietnam and Brazil are stretching their hands towards manufacturing industry, where they have their unique advantage: low-cost labor. In Vietnam, the minimum wage standard is below 1000 RMB and in India, there are 1.2 billion people supporting the country’s manufacturing industry.

It is not easy for China to maintain its position as the world factory any more. The good news is that the transition can be slow. On the one hand, developed countries need to fix their deserted manufacturing chains and developing countries such as Indian and Vietnam still have to work on their infrastructure, supply chains and factory morale, where they are far behind China.

India is becoming the new-favored world consumption center

India is an underdeveloped country with large population. However, the flourish of India’s manufacturing originates its large domestic market. In terms of cell phone, 71% of them in India are only made for functional use. Nokia was the biggest brand there not long ago. In China and other Asian countries, most people have begun to use smart phones but only few Indians can afford iPhones and Samsung smart phones. That’s why some Chinese cell phone brands that are famous for their cost-efficiency can penetrate the Indian market.

But the cost efficiency must come with extremely low cost. By removing the factories from China to the local market India is a good way to manage the cost. The cooperation between Xiao Mi and Foxconn is a perfect model. The influence of massive labor intensive enterprises stays beyond more business but profound changes in society, just like Zheng Zhou Airport Economy Zone (ZAEZ) in China.

The human labor is one of the most expensive costs in manufacturing industry. The minimum wage for Chinese workers is climbing and it is impossible for Chinese factories to use technology to automate tasks in the near future, so they have to find lower-cost labor, first in China’s coastlines, then to mainland and finally in Vietnam and India, which is proved to be the simplest and most efficient methods to reduce the cost.

The core advantage for India to be the newly-favored manufacturing center is its large population base. There are currently 1.2 billion Indians with no policy on birth control. The population in India is likely to exceed China soon. Besides, India’s real economy is lagging behind the world average level.

Labor-intensive enterprises are desperately needed in India because they can not only increase employment rate but also boost the development in other industries such as air conditioner, electricity, assembly lines and the Internet. Sometimes Foxconn will contract part of its business to small suppliers, most of which being local suppliers, we can suggest that Foxconn’s arrival in India will likely to boost or even create a new industry there that is beneficial to the development of local economy. Besides, workers in Foxconn need basic entertainments including net bar, restaurant, convenient store and day rental. It is quite simple to build such infrastructure in India.
Today’s India is blessed with huge population benefits and potential market, just as China did thirty years ago. India is on its way to surge and, perhaps, the influx of Chinese manufacturers could be its big opportunity.

Made in India is still immature

The inflow of international capital has rejuvenated India but it takes time to convert money into efficient factories. Maybe only Chinese can endure all the hardships it takes to become the world factory. After all, Chinese university graduates have no problems staying all day in the meeting rooms or talking to their clients. Even though Foxcoon could successfully bring its capital and equipments to India, it can be very difficult to build localized manufacturing team, especially the culture of working hard which is common among Chinese workers.

It has been known to all that Chinese workers are one of the most hard-working groups in the world. In order to complete the productivity they even volunteer to work overtime. Factory’s assembly lines operate like machines which can run permanently. Chinese kids are educated to respect hardworking people and admire such labor models. It has been reported that some factories along the east coast demand workers to work at least sixteen hours a day. Even in Foxconn, working overtime is quite common. For one thing, more work brings extra income for workers. For another, if the productivity is overloaded, especially in August and September when Apple launches its new products, workers in ZAEZ have to work until midnight.
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The picture in India is just the opposite. Indian workers might match their Chinese counterparts in quantity but not in quality. Indian men are known for their male chauvinism, impunctuality and egocentricity. The conflict which locates in Indians and the manufacturing industry is their laziness. The slow-paced life in India sometimes can be heart-aching.

So workers’ cultivation becomes the most difficult task for Foxconn to build factories in India. Thus it has to motivate managers from mainland China or from Taiwan to help solve the problems in India. However, even with higher salaries, Chinese workers are not willing to work in India because they do not want to live in a completely different environment.

How to motivate Indian workers is a real problem for the management team in Foxconn. Another thing to worry about is whether the orders from Xiaomi or inFocus are enough for Foxconn to run successfully in India. In fact, for manufacturers, the most challenging thing is unstable client, since the cost to build an assembly line is high. In the face of orders diminishing, many workers will leave. However, if the order goes up, there will be a shortage in labor. It is complicated to manage a factory, especially in India.

Xiaomi has done a good job in the domestic market but not necessarily in India. Once its online marketing fails, it will lose the edge in price. Local cell phone brands are also big challenges. Even though they are barely known by other people and most of them import accessories from China, they are blessed with more marketing resources, policy backup and local recognition. According to a survey, the best seller in India is not Nokia, Apple or Samsung but a local brand.
Apple and Samsung might want to be cautious about their marketing in India. Since Apple won’t cut its prices, it has to work hard in convincing Indian people into spending 1000 dollars in buying a smart phone. As for Samsung, the risk of being depreciated is high. In a word, India is going to be the next hot spot for manufacturing industry but the success requires the joint efforts from brand marketers and manufacturers.

[The article is published and edited with authorization from the author @Constantine, please note source and hyperlink when reproduce.]

Translated by Jackie Jia (Senior translator at Echo)