India & Vietnam: Mobile Manufacturing’s New Frontiers

India and Vietnam are charting distinct strategies to position themselves as global manufacturing hubs for mobile phones, aiming to provide alternatives to China’s dominant role in the sector.

India’s initial focus centered on rapidly scaling mobile phone assembly, a strategy that successfully propelled the nation to become the world’s second-largest smartphone maker by volume.

India’s Assembly Growth and Domestic Push

This rapid growth was significantly bolstered by the government’s Production Linked Incentive (PLI) scheme, though it concurrently led to an increase in raw material imports.

To mitigate this reliance, India has since launched the Mobile Phone Manufacturing Scheme (MPMS). This initiative seeks to cultivate a robust domestic supply chain, encourage local component manufacturing, and foster indigenous design and R&D capabilities.

The overarching goal for India is to develop an integrated manufacturing ecosystem, mirroring the more established one currently found in Vietnam.

Vietnam’s Strategic Ascent Up the Value Chain

In stark contrast, Vietnam, already possessing a well-developed electronics production base, is strategically shifting its focus towards higher value-added activities. This move is partly influenced by a new global minimum tax agreement, which diminishes the effectiveness of its prior low-tax incentives.

Vietnam’s Investment Support Fund now actively promotes key areas. These include advanced R&D, specialized employee training, and high-tech projects, encompassing critical fields such as chips and Artificial Intelligence (AI).

The nation’s ambition is to attract companies to undertake more complex work within its borders, thereby positioning Vietnam closer to China’s advanced manufacturing and design prowess.

Tech Giants’ Dual Approach

The strategic decisions of major technology companies like Apple and Google clearly illustrate these evolving dynamics.

Apple, for instance, has expanded its iPhone production operations within India. However, the company has chosen Vietnam for the manufacturing of more specialized products, including AirPods, Apple Watches, iPads, and various components.

Similarly, Google has made a significant commitment to Vietnam. The tech giant is building its Pixel 11 series from scratch in the country, a process that includes New Product Introduction (NPI).

Future Outlook and Competitive Imperatives

While India aspires to cultivate a comprehensive component ecosystem akin to Vietnam’s, current analyses suggest that the MPMS support might prove insufficient for attracting substantial R&D and workforce training investments.

Vietnam is widely anticipated to maintain its leadership in specialized components and advanced technologies, potentially solidifying its position as the ‘next China‘. Concurrently, India is actively striving to evolve into the ‘next Vietnam‘ in this global manufacturing landscape.

For global companies, leveraging capabilities in both India and Vietnam offers a prudent strategy to diversify and reduce dependence on China. However, India faces an urgent imperative to rapidly narrow the gap with Vietnam to sustain its competitiveness in the increasingly complex mobile phone manufacturing sector.