China+1 strategy a success for smartphones? India fast bridging gap with China, Vietnam on phone exports
India’s China+1 strategy a success? India is rapidly closing in on China and Vietnam in terms of mobile phone exports. According to global trade data cited by officials, while China and Vietnam experienced declines of 2.78% and 17.6% respectively in FY24 compared to the previous year, India's exports surged by an impressive 40.5%.
Moreover, officials have told ET that India has captured nearly half of the reduction in corresponding mobile phone exports from China and Vietnam. This indicates that the goal of securing a significant portion of the supply chain shift from China has been achieved, an official told the financial daily.
The official, speaking anonymously, remarked, "The smartphone production-linked incentive (PLI) scheme was announced with an objective to capture supply chain shifts from China. The results are beginning to show now." Although China remains the leading exporter of mobile phones, India appears to be narrowing the gap.
India's success in capturing a significant share of the mobile phone export market is a major victory for the government, according to experts. The government has been working to attract companies that are implementing the China+1 strategy to diversify their supply chains and manufacturing operations, taking advantage of the current geopolitical situation and tensions with China.
According to data from the International Trade Centre (ITC), Chinese mobile phone exports decreased from $136.3 billion in FY23 to $132.5 billion in FY24, a 2.8% reduction amounting to a $3.8 billion decline in total exports. Similarly, Vietnam experienced a fall in mobile exports from $31.9 billion in FY23 to $26.27 billion in FY24, a 17.6% reduction, or a $5.6 billion decline in total exports. The combined reduction in exports from both countries totaled $9.4 billion.
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India's mobile phone exports, on the other hand, have risen by over 40% to reach $15.6 billion in FY24 from $11.1 billion in FY23, an increase of $4.5 billion. Another official commented, "The data implies that India captured nearly 50% of the total decline in mobile exports from China and Vietnam."
The smartphone PLI scheme has proven to be effective, especially with Apple establishing India as its second-largest iPhone manufacturing base after China. Following the scheme's introduction in 2020, three of Apple's key iPhone suppliers – Foxconn, Pegatron, and Wistron (now owned by Tata) – established factories in India. As a result, Apple has doubled its production and exports from India over the past two fiscal years.
According to data provided by Apple's vendors to the Ministry of Electronics and IT (MeitY) under the PLI scheme, production increased from $7 billion in FY23 to $14 billion in FY24, while exports rose from $5 billion to over $10 billion during the same period.
iPhone exports alone account for 65% of India's $15.6 billion mobile exports and more than one-third of the country's electronics exports, which surpassed $29 billion in FY24.
Officials also expect companies like Samsung to increase their mobile phone exports from India. Samsung, another beneficiary of the PLI scheme, exported around $3.5 billion worth of mobile phones from India in FY24, which was one-third of Apple's exports.
Currently, Samsung is the largest exporter of mobile phones from Vietnam. According to a report by Vietnam News Agency in January 2024, Samsung had invested $20 billion in Vietnam as of late 2023, with more than 50% of its products sold worldwide being manufactured in the country.