Electronics

Today, the latest news revealed that more than 100 employees of Hon Hai’s factory in Chennai, India have been infected with the new crown, and the factory has begun to strictly control the entry and exit of employees until the end of May. As a result, the local iPhone 12 production dropped by more than 50%. Although Hon Hai declined to comment.

Not long ago, in addition to 10 Chinese engineers at Foxconn’s Chennai plant in India who contracted the new crown pneumonia, Wistron, another key company in Apple’s manufacturing chain, also closed its plant in southern India for five days. It was also due to the discovery of multiple employees. Caused by a virus.

The intensification of the epidemic in India, employee infections and factory shutdowns have caused the local government to even implement a complete blockade of provincial administrative units. It seems that Apple and industry chain companies have turned their production and supply chains from China to India in vain.

In fact, although the Indian government has also taken some measures to prevent the spread of pneumonia, the government does not seem to have implemented more measures on the manufacturing blockade. Everyone knows about India. As a country with a large population, it has always existed in South Asia in a special way. The relatively inadequate defensive measures may be due to other economic and human rights considerations.

The editor also believes that it is not accidental that the epidemic in India has attracted much attention, especially affecting the nerves of the electronics industry chain. As early as 2 years ago, India had surpassed the United States and became the world's second largest smartphone market. In addition to the early Apple and Samsung, later domestic manufacturers such as Xiaomi, OV, and Zhenwo have gradually spread the market in India, and even Started to establish a manufacturing business and moved all the manufacturing plants directly. In just a few years, local Indian mobile phone brands have gradually been eroded by Chinese brands, and now they are no longer visible.

Because of this, India's voice in the electronics and other industrial worlds has begun to increase, and it has changed from a sense of absence to a certain amount of production capacity. At the same time, in order to make India a manufacturing and export center, the local government is constantly increasing the import tax on smartphones and has introduced an incentive plan (PLI) for hardware manufacturers.

According to the news, the three giants of Apple's foundry, Foxconn, Wistron and Pegatron, have all participated in this incentive plan and will invest nearly US$1 billion in India in the next five years.

After all, for the terminal manufacturer Apple, local manufacturing can reduce the cost difference caused by tariffs. On the other hand, eggs cannot be placed in the same basket. This is also a means for Apple and its foundries to hedge risks.

However, with the support of terminal manufacturers, India's ambition to replace the domestic manufacturing industry has not passed the new crown epidemic. Compared with China's stable domestic environment and high-quality labor force, India's first major epidemic examination was "uncovered".

In addition to the impact on the supply chains of Apple and Samsung, Chinese brands that have rapidly expanded in India in recent years, such as Xiaomi, Zhenwo, and OV, have also been affected by the epidemic to varying degrees.

In fact, the epidemic will force India’s Q2 to Q3 production of smartphones to reduce or exceed the order of magnitude of 10 million. This is still a conservative estimate. If the epidemic intensifies, the impact may last longer. Judging from the current situation, it is really not optimistic.

To make matters worse, in addition to affecting the normal operation of foundries, the epidemic has also directly weakened consumer demand. India’s Q2 smartphone shipments may plummet by 25%.

In general, considering the instability of Indian production and strong iPhone demand, China will remain an important manufacturing center for Apple, at least in the short term. After all, although Foxconn has two factories in India to produce iPhones, there are still four factories in China. The largest iPhone manufacturing base is still in Zhengzhou. And China's position in global mobile phone production is currently very stable. In contrast, India, this year's output will account for 20%, which is obviously a difficult task.

Although Apple has been sparing no effort to transfer product production out of China in recent years, the epidemic has caused its production in China to rebound last year and even return to the level of a few years ago. The editor believes that in addition to a stable environment and high-quality labor, the increasingly developed domestic infrastructure and efficient local government support are the foundation for the continuous development of domestic manufacturing to the high-end. Foxconn has also been actively trying to succeed in China. The experience is copied to India and other "spare tire" countries.

However, although it is unlikely that Apple will completely abandon manufacturing in China, with the rapid development of China's domestic economy, labor costs have always been a difficulty that many foundries cannot overcome. In the future, players in the mobile phone industry chain such as Apple and Foxconn will continue to expand and find other markets to increase production. The main theme remains unchanged. Countries such as India and Vietnam will still have more opportunities.

Compared with Apple and Foxconn, many industry chain companies are much smaller and have no right to speak. They have to follow Foxconn to open factories in India. However, India's investment environment is relatively poor, and its attitude towards Chinese companies is very general. Now that this situation has emerged, Apple and Foxconn have moved their orders to the mainland. Those small companies that followed the past will undoubtedly suffer heavy losses. There should be a lot of complaints behind them, right?