The industrial park in the Chinese metropolis is almost on its knees due to the lockdown imposed by Beijing. The reasons to remain anchored to the Dragon in a situation also undermined by the geopolitical events of 2022 are beginning to wear out. Alternative production sites are being examined
Workers walking the highways of Henan Province clutching plastic bags full of personal belongings: is the mass exodus that began over the past two days from Foxconn Technology Group’s iPhone factory in central China’s Zhengzhou.
About half of Apple’s iPhones are produced here in an industrial park that employs about 200,000 people. But the Beijing authorities imposed one curfew by November 9, a revolt of sorts broke out to contain a Covid outbreak. Fearing contracting the disease and fed up with being held on campus in conditions of increasing hardship, hundreds of staff got up and left. Like this, Taiwanese electronics giant Foxconn may face a drastic reduction in shipments. In short, “the iPhone City” as Zhengzhou Industrial Park has been dubbed, if you can’t get on your knees, we’re nearby and this will give Apple another reason to implement its geographic diversification strategy, which has already identified India as an alternative to China.. Recently, the Big Tech founded by Steve Jobs announced that the iPhone 14 will be manufactured in India and plans to manufacture 25 percent of its devices outside of China by 2025 , fresh from his third term at the head of the Communist Party seems to be aware of the danger almost unaware that China seems to be losing its dominance as a reference pole for global manufacturing. According to research by Jupiter Global Emerging Markets, this role “may come to an end as political and economic changes shift the balance towards India”.
Indeed, as China folds inward, Narendra Modi’s government took the opportunity to announce the Make in India campaign with the aim of attracting investments from abroad as well. The $10 billion in chip manufacturing incentives, for example, have attracted interest from companies from Singapore to Israel. For investors, therefore, India’s geopolitical advantages are becoming increasingly important and the longer the Chinese lockdowns last, the more money is being invested in India. Coming back to Apple, the zero-Covid policy, which is being drastically applied to a nerve-center industrial zone like Zhengzhou’s at the time of Blitz, is killing the Cupertino house’s so-called “iPhone advantage.” Reasons to remain anchored in China are beginning to dry up as alternative manufacturing hubs emerge around the world. “In a way – Jupiter explains in his analysis – the movement of capital and investment from China to India seemed inevitable. Since the Trump era, Chinese and American nationalism and the intimidation surrounding it have grown stronger.
Added to this were the major geopolitical events of 2022: the war in Ukraine and Chinese military exercises around Taiwan. India has become more attractive as a democracy in the face of the increasingly authoritarian position of its eastern neighbor, with whom it already has strained relations over border disputes. Additionally, India’s knowledge base and demographic advantages make it the main alternative to China. Precisely because of the geopolitical tensions, the development of alternative supply chains, especially from “friendly” countries, has never been more important for Western companies. At the same time, the Indian government publicly declared its desire to expand the production chain by offering incentives for producers to set up factories. It is not the first time that global production locations have changed. This has happened before, Jupiter recalls, “first with Japan as it became a manufacturing hub in the second half of the 20th century, and more recently with the rise of the Asian Tigers of Singapore, Taiwan and Korea. However, no one has been as central to global production as China. Finally, The transition to India could result in a scenario where the world will sustain two major manufacturing hubs for some time: India and China. But the current globalized economy requires that the most economically productive pole wins in the end, in this case India.