Global supply chain shift to India accelerates on “Peak China”

Samsung Electronics recently revealed its goal to become the top player in the world’s second-largest smartphone market with its new Galaxy S23 series. [Image source: Samsung Electronics]

India is emerging as an alternative to China as Samsung Electronics Co., Hyundai Motor Co., LG Electronics Inc. and POSCO Holdings Inc. as well as global companies such as Apple Inc. are shifting their businesses to India on belief that China’s growth has peaked and is headed on a downward spiral.

Companies are eyeing opportunities in India as the country can act as both a production base and a consumer market. It has a population of 1.4 billion and is expected to overtake China to become the world’s most populous country this year.

According to the conglomerate circle on Sunday, LG Electronics recently invested 2 billion rupees ($24.4 million) in its plant in Pune, India to expand the production line for double-door refrigerators, which can produce about 100,000 units a year.

The Korean electronics giant has been manufacturing single-door refrigerators and double-door bottom freezers at its Pune plant. The company, however, decided to expand the production line for double-door refrigerators as they gained more popularity in the Indian market than the low-priced single-door option.

Samsung Electronics is also set to increase its market penetration in India. It recently revealed its goal to become the top player in the world’s second-largest smartphone market with its new Galaxy S23 series.

Growing political uncertainty due to the U.S.-China conflict is another reason for India’s rise. [Photo by MK DB]

POSCO is pushing forward with its investment in India to take advantage of the nation’s growth potential. Hyundai Motor, in the meantime, had announced a plan to invest 40 billion rupees to expand its research and development and infrastructure for electric vehicles in India by 2028.

According to a Bank of Korea report on “India’s economic status, growth potential and risk assessment,” “India is expected to benefit from China’s diminishing role in the global supply chain amid conflicts with Western countries.” This means U.S. companies may expedite global relocation of their production bases to India.

This year, India is expected to continue its high annual growth of more than 6 percent for a third consecutive year. S&P Global predicted in a report last November that India will grow at an annual rate of 6.3 percent on average from 2021 to 2030 and become the world’s third largest economy, surpassing Japan and Germany.

Growing political uncertainty due to the U.S.-China conflict is another reason for India’s rise. Global companies have already begun moving their production base to India from China. Apple, for example, is considering moving its iPad production line in China to India, according to foreign media outlets. Apple’s largest supplier Foxconn, a Taiwanese contract electronics maker, also decided to quadruple its Indian factory workforce. Tech giant Alphabet Inc., Google’s parent, is also moving some of its production lines for Google’s Pixel phones to India from China.

“South Korean companies must actively seek entry into the Indian market given its high growth potential,” the central bank said. “To make success easier, they need to study the moves of Western companies before them and prepare plans for government regulations and an unfriendly business environment.”