After Apple, Google says it will manufacture smartphones in India

Google's announcement that it will produce its Pixel smartphones in India is poised to reshape the nation's manufacturing landscape. Following Google's launch of the latest Pixel smartphone series, Thursday's development successfully answers critical questions about India's manufacturing future and its ability to attract tech giants. It, however, also leaves several manufacturing requirements, such as manpower issues, to be addressed.

Rick Osterloh, Google's senior vice president of devices and services, has stated that the upcoming Pixel 8 will be the first device manufactured in India, with production set to begin in 2024. While Google has confirmed its partnership with domestic and international manufacturers, the details remain undisclosed.

Union minister for electronics and information technology Ashwini Vaishnaw welcomed Google's decision and made specific requests, stating, "We have asked Google to start manufacturing Tensor chips for Pixel phones in an Indian lab within the next three years. We have also urged them to bring their supply chain partners to India." This aligns with India's ambitious goal of achieving $300 billion in electronics product manufacturing by 2025-26.

This development parallels Apple's push to expand local production of its flagship iPhone devices in India. Tata Electronics, a Tata Group subsidiary, is already involved in manufacturing iPhone casings at its Tamil Nadu facility in Hosur and recently secured orders for the assembly of iPhone 15 and iPhone 15 Plus.

To support its partnership with Apple, Tata Electronics has initiated several strategies, including collaborating with local educational institutions to train workers, upskilling its female factory employees, hiring engineers from competitors, and expanding production lines in Hosur. As reported by Bloomberg, Tata Electronics is also set to hire 45,000 female workers at this plant over the next 14 months.

India has made substantial strides in mobile phone manufacturing, establishing itself as the world's second-largest hub for mobile phone production. This growth has been fuelled by significant investments from original equipment manufacturers (OEMs), original design manufacturers (ODMs), and companies specialising in mobile components and parts.

Counterpoint Research estimates that India is set to export about 22 per cent of its assembled mobile phones in 2023. However, senior research analyst Ivan Lam has cautioned that China's manufacturing and supply chain will continue to play a pivotal role in the long term.

Google's move significantly bolsters India's 'Make in India' initiative, which promotes domestic manufacturing. Recent data from government and industry sources show a substantial surge in mobile phone exports, surpassing Rs 45,000 crore during the April-August period of the current fiscal year, compared to around Rs 25,000 crore during the same period in the previous fiscal year.

Additionally, India is on track to exceed Rs 1.2 lakh crore in mobile phone exports in the current fiscal year, with Apple leading the market share by securing over 50 per cent in FY24. However, the report highlights a 6 per cent year-on-year decline in smartphone shipments during the first half of the current year, primarily owing to the underperformance of companies like Samsung, Xiaomi, and Lenovo Group.

In the global smartphone ODM/IDH industry, the 'Big 3' — Huaqin, Longcheer, and Wingtech — dominate, accounting for 76 per cent of the market share in the first half of 2023. The report also notes that while outsourced design shipments decreased in the first half of 2023, their share increased compared to the same period the previous year, with the top six ODMs holding a 95 per cent share of the total ODM shipments.

India's electronics manufacturing services (EMS) sector has reaped the benefits of the government's production-linked incentives, making the country an appealing manufacturing destination. However, India remains dependent on imports for specific components, particularly mobile phones. The cost breakdown of smartphone production is also a critical factor, with semiconductors, display assembly, and camera modules accounting for approximately 50 to 60 per cent of a smartphone's cost.

As Google follows Apple's footsteps in local manufacturing, India's ambition to become a global electronics manufacturing powerhouse takes a significant leap forward. The repercussions of this development remain a subject of keen industry interest and scrutiny.