Tata Electronics has agreed to buy a majority stake in Apple iPhone contract manufacturer Pegatron, a Taiwanese company. Earlier, the Tata Group company had bought the Karnataka plant of another iPhone contract manufacturer, Wistron. With these acquisitions, the Tatas have become a major manufacturer of iPhones in India along with Foxconn, which remains the biggest manufacturer of Apple’s flagship product.
It is indeed a big leap for mobile manufacturing in India. However, it also comes as a big responsibility for the Tatas to prove their credibility globally as a manufacturer of high-end electronic products. iPhone manufacturing in India has taken off with exports posting a 37 per cent growth to $10.5 billion in the first seven months of the current financial year over the same period last year. But so far, most of it has been manufactured by Indian subsidiaries of Taiwanese firms.
The Tatas have now emerged as a major Indian player vying for the iPhone manufacturing pie. Currently, iPhone manufacturing in the country is mostly limited to last-stage assembling, which accounts for around 15 percent of the product’s value. The government aims to increase this to 40 percent. For that to happen, local manufacturers like Tatas need to up their game. Apple has big plans for India that go beyond manufacturing 50 million iPhones a year— the world’s largest consumer electronics company also sees the country hosting its entire production process from planning and designing to mass production. If the Tata Group can prove its credibility in precision engineering and high-end manufacturing, it could also open the market for more local players.
India, which is aspiring to be a global manufacturing hub focusing on semiconductors, mobile phones and defence equipment, would depend on these local companies to prove its dependability on the global stage. But to incentivise such manufacturing, only cash or tax incentives may not suffice. The country needs to spend big on creating more highly-skilled manpower, and foster a no-compromise-on-quality environment in the country. More and more countries are looking inwards while trying to revive local manufacturing. That is why developed countries are raising non-tariff barriers for goods from emerging markets. If India needs to get over these hurdles, it needs to think beyond incentives.