China Churning: Post Apple iPhone Row, Can India Take Advantage of Tech Divide?

Amid anti-Covid protests in China, will India find it opportune to expand manufacturing goals with a global giant?

Amid anti-Covid protests in China, will India find it opportune to expand manufacturing goals by roping in a global giant?

Image: Kamran Akhtar/ The Quint

(This is Part One of a series focusing on the the current crisis unfolding in China and its global implications.)

Democracy is a double-edged sword. And so is benign autocracy it seems. Protests against Covid restrictions in China last month came as a surprise for many, and the Chief Executive Officer(CEO) of Apple Inc Tim Cook must have been one of them. His deafening silence on what China and Apple mean to each other is loud enough for the world to hear.

On that silence hangs many questions: Is the three-decade economic marriage between the world's most powerful and richest democracy and the planet's most populous country on the rocks? Is there something called a principled approach to democracy for a Californian company that is often seen as a flagbearer for liberalism? Is there an opportunity for all this in India? If so, what are the obstacles that need to be overcome?

As per news from hounding reporters, Cook is maintaining a studied but ominous silence that needs interpretation. These are questions that could mean a lot for India.

• Apple's CEO Tim Cook maintains diplomatic silence on company's China ties post Covid curbs.

• About six million iPhones have been reportedly confiscated in their manufacturing run at Zhengzhou due to the protests.

• Unless a national political consensus is reached, global manufacturers in the face of BJP's combative political style may prove to be counterproductive for Modi's 'Make In India'.

• The right course for India would be to identify the best case prospects for a China Plus One strategy, including less-known component makers, and woo them with a mix of incentives and assurances.

How Can India Upset China’s Apple Cart?

About six million iPhones have been reportedly confiscated in their manufacturing run at Zhengzhou due to the protests in China, and more significantly for democracy-watchers, Cook's Apple has quietly modified its AirDrop feature for iPhone-to-iPhone exchange of information so that (as most would say), unpleasant information does not cross the Great Wall of China. That is damaging to Apple's reputation both as a shareholder idol and an American icon— not to speak of its card-carrying Californian identity.

But this is not just about Apple as far as India is concerned. Dozens of other companies involved in manufacturing products or components in mainland China have to worry about their future in the country that has emerged as the world's leading low-cost manufacturing powerhouse.

At least some of them could mean a big opportunity for Prime Minister Narendra Modi's 'Make In India' dream but it is not as if India is the only country in the reckoning for the so-called 'China Plus One Strategy'. Mexico, Taiwan, Myanmar, Indonesia, Thailand, or Vietnam— anyone could pip India into the race.

It is true that Covid-fighting policies, rising labour costs, supply chain disruption issues, and high freight rates in China have resulted in manufacturers looking at other locations in addition to trade disputes between Uncle Sam and the Chinese Dragon. But the field is not the game.

Can Modi’s Make in India Thrive Amid China Crisis?

Here's the thing: a red carpet and big talk on democracy, a huge domestic market, and rule of law alone are not enough for India. Infrastructure, various tax concessions, and a general work culture matter, not to speak of political stability. Apple is discovering now the ugly side of political stability as an authoritarian Chinese communist rule is showing signs of a chaotic weak spot if things go out of control.

On the other hand, the prolonged legal tussle between Mukesh Ambani-led Reliance Industries and Amazon over Future Retail— owner of Big Bazaar, shows that the "rule of law" in India can get a nationalist colour.

The recent controversial tussle between Shiv Sena in Maharashtra and the BJP that rules in Gujarat over Vedanta's planned semiconductor facility involving Taiwan's Foxconn, and the whimpering end of Maharashtra's Enron power project that Shiv Sena stifled in the 1990s, ring alarm bells for potential investors.

Unless a national political consensus is reached, global manufacturers won't play ball easily. BJP's combative political style may prove to be counterproductive for Modi's 'Make In India' dream.

If trade disputes are a problem between the US and China, democracy itself can create peculiar situations for global manufacturers in India. However, past success stories involving brands like Suzuki, Nokia, GE, and Hyundai show that India is poised well to attract those manufacturing companies in which political controversies are minimum, non-controversial, positive, or nil. Let business logic, not biased governments, do the talking. 

Does India’s Infrastructure Support Foreign Investments?

The Indian state of Odisha's capital region has a couple of dozen higher education institutions and the state is also surplus in power and water. India can pleasantly surprise the foreign investor but not all states are endowed with all things. Often investors take calculated risks based on a number of factors— among which are policy support and long-term political stability.

A healthy rivalry between the state governments but one in which the central government would not arm-twist anybody is critical if we are to balance infrastructure, incentives, talent, and resources to attract investors.

I would also ask what manufacturing means for job creation in the 21st Century. The year 1990 was not the same as the year 2030. Emerging technologies like robotics, digital manufacture, and 3D printing have made manufacturing a lot less labour-intensive while sophisticated infrastructure and conducive labour laws are also critical for long-term planning by multinationals.

Apple’s India Partnership

Apple has already been bargaining hard with India, much like Electric car- maker Tesla on incentives. These are companies that know their power as financial powerhouses, and as icons, brands and negotiators. Piecemeal methods with a lack of transparency or political consensus may put off investors.

Talk is cheap. The walk involves details, especially in manufacturing industries that involve years of planning in shifting, erection, and maintenance of facilities. India is used to the information technology revolution, in which hiring smart workers to slog in plug-and-play offices have made things look a lot easier. Large-scale manufacturing is a different game altogether as it often involves billions of dollars of risk capital.

The right course for India would be to identify the best-case prospects for a China Plus One strategy, including less-known component makers, and woo them with a mix of incentives and assurances. These must match a strategy that creates more jobs with lower capital and is talent intensive in a manner that helps India's natural advantages.

Red carpets have little meaning when the flags are not suitably green.

(The writer is a senior journalist and commentator who has worked for Reuters, Economic Times, Business Standard, and Hindustan Times. He can be reached on Twitter @madversity. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)