ColdFusion - India is Planning to Dominate Smartphone Manufacturing

Starting point is 00:00:00 This video is brought to you by Brilliant.org. Hi, welcome to another episode of Cold Fusion. Last time, we took a look at an artificial intelligence that could write anything, from news articles to computer code. It could also summarise information and answer questions based on the information, and not to mention simulating conversations with people of the past, such as Einstein. It's an interesting episode, so you're missing out if you haven't seen it already. This episode will be a bonus one for this week.

Starting point is 00:00:30 For Apple, the iPhone is a huge part of their business. This year it's made up about 44% of all of Apple's sales, and the iPhone made up $147 billion in revenue last year. We all take it for granted, but making a smartphone is a complicated process, from raw materials, research and development, to manufacturing, production and sales. It's a modern Marvel that we can make hundreds of millions of the things. But in 2020, things are being unsettled. Global lockdowns are shaking up economies and faith in existing supply chains.

Starting point is 00:01:08 There is a need to make supply chains more robust. To tackle this, this year, Apple, the world's most valuable company, has started ramping up production of iPhones in India as opposed to China. It could mark a significant shift not only for Apple, but for geopolitics and the world economic hierarchy for the next decade. Let's take a look. You are watching Tulled Fusion TV. In terms of manufacturing, Apple has historically had close ties to China.

Starting point is 00:01:44 This started in 2001 when the original iPod was manufactured by Foxcon in China. Over time, this relationship between Apple and China only grew. According to the publication maker, China accounted for 90% of Apple's product factories in 2019. Then 2020 happened and COVID lockdowns. coupled with the China-U.S. trade war has forced the tech giant to reconsider. But where would they turn to? Well as it turns out, the answer may lie next door. India started manufacturing mobile phones in 2014 and manufactured 150 million in 2019.

Starting point is 00:02:23 In fact, they are the second largest mobile phone manufacturer in the world. India has a population of 1.3 billion, a young workforce, and a government that's actively actively trying to reboot their economy so they're showing potential. Prime Minister Narayana Modi has called for a self-reliant India and wants to encourage local manufacturing to create jobs. This plan is called the production-linked incentive program. If successful, India hopes to revive an economy that has been battered by lockdowns. Part of the plan is trying to Now playing on Netflix, The Hawk.

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Starting point is 00:03:28 Now playing. Only on Netflix. to attract smartphone makers with a $6.6 billion federal scheme. An incentive of 25% on capital expenditure will be provided for production of electronic components, semiconductors and other parts. India projects that these efforts will employ 800,000 people and lead to exports totaling $143 billion over the next five years. This is direct economic competition with China,

Starting point is 00:03:55 and also comes at a time when both nations are enduring a conflict, at the Himalayan border. Though, it could make India a global hub for the manufacturing of mobile devices. If realized, this would have a massive flow and effect in the Indian economy. With more people employed and earning more, there could be more demand for goods in the general economy,

Starting point is 00:04:17 which leads to more economic activity without increasing debt levels. We all saw what happened to China once they started becoming the manufacturing hub of the world in the 2000s. They quickly rose up through the ranks of living standards and economic power. If Apple's bet on India is successful, would other companies follow suit? It's interesting to think about this. Local Indian manufacturers weigh in. Harry Om Rai, founder of Lava, India's largest phone maker. Quote, is the thoughtful move by the government

Starting point is 00:04:50 aimed at wooing Apple to bring significant iPhone manufacturing to India? When the iPhone manufacturer shifts, an entire ecosystem follows. The next five years will be dramatic, and India, could become the new China in phone manufacturing. And the ball has already started rolling. In late 2019, Apple's largest contract manufacturer, Foxcon, started producing the iPhone 10R. This was in the southern Indian city of Chennai. iPhone charges are also being made in the same region. Then, in July of 2020, Apple's production in India picked up pace.

Starting point is 00:05:29 Foxcon announced a $1 billion investment to expand iPhone. manufacturing operations in India. A few days later, Apple's second largest contract manufacturer, Pegatron, registered a subsidiary in India. Also in July of 2020, Foxcon began manufacturing the iPhone 11. This was the first time that a top-of-the-line iPhone was made in India, and this was a significant event for Apple's supply chain. Previously, Apple only manufactured its older, cheaper models there. Apple's iPhone 11 will now be made. will now be made in India. The telecom minister tweeted with some other phones which are also being

Starting point is 00:06:10 made in India of Apple saying that this is a humble beginning. The iPhone 11 is one of the best selling smartphones for Apple and the move signals a renewed confidence in India's manufacturing capabilities and demand in the market. Manufacturing in India saves the company 22% in import duties. And should Apple choose to pass this onto the customers, it could become a very good option and a very aggressively priced option, giving tough competition to Android-based smartphones. And then in August of 2020, yet another major milestone. Wistron, another Taiwanese electronics manufacturer, began assembling Apple's latest iPhone SE and started a trial production of the recent iPhone 12.

Starting point is 00:06:53 The Times of India reported yet another Apple vendor was looking to shift at least six production lines from China to India, and this would contribute $5 billion worth of iPhone exports. It is possible that iPhones could eventually be cheaper for the Indian market, but cheaper doesn't necessarily mean more affordable. We'll have to wait and see what Apple does here. If you're interested in learning about science and technology, you should check out today's sponsor, Brilliant.org.

Starting point is 00:07:21 They have a bunch of great learning courses on anything from quantum computing to solar technology and artificial intelligence. Their neural network course is particularly useful. if you want to understand how most common AI works, and I don't mean just have a vague idea, but really understand it. They've managed to make learning fun and interesting. Whether you're just thinking of expanding your scientific thinking or learning how to program with Python, to start learning today, go to www.brilliant.org slash cold fusion, and the first 200 people will get 20% off their annual premium subscription. Okay, so we've seen how India is positioning themselves to be an economic

Starting point is 00:08:00 competitor to China when it comes to phone manufacturing. So let's dive deeper. As China became the manufacturing hub of the world, their wages also grew, and this priced the nation at a disadvantage when compared to emerging markets. In 1990, the average wage in China was $150. Now it's around $13,000. And this has made manufacturing products in China more expensive. China's GDP per capita is 10.1,000 versus 2.2,000 in India. Since the cost of living in India is lower, the wages are generally lower. Indian monthly manufacturing salaries are roughly one-third that of China's. Despite all of this, it's not going to be easy for India to absorb and takeover manufacturing capacity from China.

Starting point is 00:08:53 Apple once looked at the nation back in 2015, but found their environmental and safety standards be lacking. Among the reasons cited were high costs of setting up factories, a high cost of training workers, inadequate infrastructure, and lack of government support. In a report published by the information, critical components still had to be imported from China, which still means that China was the weak point for the supply chain. To highlight this, in July of 2020, iPhone production at Foxconn plans in India had to be halted because of increased scrutiny of China Chinese imports into the country. The Economic Times reported that 100% of components from China were being physically checked in India after escalating tensions between the two nations. So clearly,

Starting point is 00:09:41 there still is some work to be done here. It is a long shot for India, but as we've seen, some current iPhone 12s are already being produced there, and this trend is only set to grow in the coming decade. I don't think Apple is stupid when it comes to major business decisions like this. With government support encouraging investment into the nation, India just has to overcome the hurdles of infrastructure, tooling and training. As a result, millions may be lifted out of poverty from the economic flow-in effects, just like we saw in China a few decades ago. So the iPhone, designed in California and made in China, maybe more of us will be seeing, designed in California, made in India. So let me ask you a question. If investment and manufacturing pours into India,

Starting point is 00:10:33 do you think we could see an economic boom even half as good as what we've seen in China over the past couple of decades? Do you think this is likely or unlikely? Next week, we'll be taking a look at the updates to Huawei and then the alleged fraud of Nicola Motors. These were the same episodes I mentioned last week before I had the idea to do this bonus video.

Starting point is 00:10:56 If you want more cold fusion, go and watch last week's video. So many of you couldn't believe what you were witnessing. If you want to see anything on science, technology, business or history, don't forget to subscribe and follow me on Twitter and Instagram. Alright, so my name is Degogo and you've been watching Cold Fusion and I'll see you again soon next week. Cheers guys. Have a good one. Cold Fusion, it's new thinking.

ColdFusion - India is Planning to Dominate Smartphone Manufacturing

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