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It's true at this current time, China is the best ecosystem to manufacture electronics. Moving anywhere will incur a higher cost but this higher cost is tempora

It's true at this current time, China is the best ecosystem to manufacture electronics. Moving anywhere will incur a higher cost but this higher cost is temporary. This is econ 101. Moving now is pricier in the short run, but the investment, particularly in India, means that there will be a new ecosystem being built that will eventually provide the same costs and availability as manufactured in China without having to deal with the forced tech transfers, censorship, nationalistic boycotts, and a country that is increasingly hostile to democratic values and international norms.

asymmetric 8y ago
> without having to deal with [...] a country that is increasingly hostile to democratic values and international norms. I’m not sure this is considered a minus in Foxconn’s (and most capitalist’s) book
rohansingh 8y ago
Unfortunately I don't think it's that straightforward, specifically for moving development to India. One of the major issues for manufacturing in India is the availability of reliable electricity. Even though India now has a net surplus of electric generation, there are systemic problems with the electric grid. Some of them are due to poor infrastructure, others due to theft or corruption. But the takeaway is that a factory in India just can't run for 24 hours a day the way it can in China. This is not likely to change in the foreseeable future, even with sustained international investment. There are a ton of constituencies in India that make fixing these kinds of issues much more complicated than in China. So while a company like Foxconn may be able to setup a factory and use their considerable resources to make it work, I don't think we're likely to see the kind of ecosystem pop up that you see in Shenzhen.
- potatofarmer45 8y ago
  I recall talking to an old hand at Li & Fung (they're the largest contract manufacturing company in the world) and he talks of the old days where Shenzhen was literally a village with no factories, no paved roads, and no electricity. When they wanted to manufacture textiles back then, they literally had to build a factory from the ground up. It's true India has a lot of issues. But the good thing about investments like these is that it creates an opportunity for everyone involved to potentially make a change for the better. This could be the start of a new series of investment in manufacturing and the potential could batter enough heads together to fix issues like electricity reliability especially if every has a vested interest in making it work out. I'm not saying it will definitely happen, but these are the sort of gamechangers that could disrupt the status quo for the better.
  - ksec 8y ago
    >Li & Fung (they're the largest contract manufacturing company in the world) May be they were, but I doubt they are the largest anymore. LF is has been selling asset after asset and their share price are now in 20 Yr's low. Basically they are a dying company.
  - entity345 8y ago
    > Shenzhen was literally a village with no factories, Indeed. The thing is that China has been investing like crazy in infrastructure projects which proved crucial to develop industry and its physical supply chain. > no paved roads, and no electricity And they built all that first. I was in Shenzhen 10 years ago with an Indian colleague, its first trip to China. He was shocked when he saw that Shenzhen was a modern metropolis with large avenues as he was expecting something like in India...
  - btian 8y ago
    When was that? They may be exaggerating. I was in Shenzhen in the early 90s, and there was already reliable electricity, roads, ports etc., and those were not built by Li & Fung
    - blacksmith_tb 8y ago
      Here's a set of photos from 1980[1], Shenzhen looks pretty provincial at that point. 1: https://www.flickr.com/photos/lwdemery/sets/72157611154071370/ https://www.flickr.com/photos/lwdemery/sets/7215761115407137...
  - rohansingh 8y ago
    > It's true India has a lot of issues. But the good thing about investments like these is that it creates an opportunity for everyone involved to potentially make a change for the better. This could be the start of a new series of investment in manufacturing and the potential could batter enough heads together to fix issues like electricity reliability especially if every has a vested interest in making it work out. In theory this is all true, but you really have to look at the facts on the ground and the specific situation. Tons of folks have agreed with what you're saying, and poured in investment, and the situation remains really challenging. It's not for a lack of effort — India has a huge potential labor force, it's well-situated for shipping to emerging markets (like China, parts of Africa, or India itself). And, as was pointed out above, it has a strong democratic tradition that makes it appealing to Western investment. But that same democratic tradition makes it a very different situation from China. It can take literal decades to organize and satisfy all the constituencies involved for projects like a power station, factory complex, or highway construction. Labor constituencies are strong and organized enough to seriously push back against projects, and are often skeptical of foreign investment and "interference". Political parties even resort to violence to stop initiatives that they disagree with. I'm not saying that it's going to be like this forever. As a US national of Indian origin, I would be happy if the the situation was different so that I could work with manufacturing partners in India. Having some cultural and legal ties to the country would give me an advantage that I don't have when working with partners in Shenzhen or Shanghai. But it's really just not the case right now. By all means, I'm happy that this investment is happening, but I think we need to be realistic. For a manufacturing ecosystem to develop that looks anything like China does, it's going to be more on the scale of 50 years or more, not 5-10.
- NicoJuicy 8y ago
  Made in India 2025 is a long term commitment that will become very profitable. Since India is also a closed market, but more aligned with Western values
- mywittyname 8y ago
  I imagine any factory builder would take this into account and construct enough onsite power generation to maintain full operation during outages.
  - sandworm101 8y ago
    A car assembly plant can pull up to 100 MVA, that is 100,000 kva or roughly 1,000,000 amps at household current. That isn't going to come from a few honda backup generators. Such power would require either a few hundred acres of solar panels attached to battery the side of a small nation, or an on-site combustion plant.
- gpm 8y ago
  I don't pretend to have a great understanding of what goes into building manufacturing facilities on the scale of Apple/Foxconn, but is the state of the electrical grid actually that relevant? It seems like that they would be a big enough consumer of electricity that any standard grid would struggle to accommodate them, and they would be doing things like: - Placing themselves immediately beside the power plant. - Place their own wires between themselves and the power plant. - Maybe even build their own power plants (particularly with things like solar/wind that scale down nicely).
  - ticmasta 8y ago
    >> Maybe even build their own power plants (particularly with things like solar/wind that scale down nicely). Renewables in this scenario is a fairy tale. [No Renewable Subsidy] + [Shift Downside onto Public] + [Energy Demand Timing] = COAL!
- reaperducer 8y ago
  One of the major issues for manufacturing in India is the availability of reliable electricity. I've heard this a number of times over the last decade or so, and wonder what is it that prevents factories from running their own generators/power stations. Is fuel availability also a problem? Is is not economically feasible? There are plenty of factories in the world that have backup power sources. What's happening in India that makes this not common?
  - bluGill 8y ago
    Power from generators cost substantially more than power from a large baseload power plant. Factories install backup generators, but they are not the primary source of power because it is not economical to use them that way.
    - culturestate 8y ago
      I'm not anywhere near an expert in this field, but I feel like I've been hearing a lot of noise about on-site power generation recently. Apple even (reportedly [1]) has their own on-site plant for Apple Park and only uses utility power as a backup; is there such a substantial difference between the power needs of a major corporate campus (with significant technical R&D onsite) and a manufacturing facility? 1. https://appleinsider.com/articles/12/03/10/apple_provides_additional_details_renders_for_cupertino_campus_project https://appleinsider.com/articles/12/03/10/apple_provides_ad...
      - bluGill 8y ago
        Depends. Generally with power there are elements of scale in favor of very large generation plants. Manufacturing does sometimes have their own power plants (aluminium needs a lot of power to refine) when you can cross that line. Also if the local utility is running into issues building large plants a medium sized plant might get under the regulations and so be cheaper. Of course when you run your own plant you also control the reliability - in some cases this can be worth a lot of extra cost. Utilities often give companies a large discount for having a backup generator that the utility can ask them to switch to at times of high demand: depending on how efficient Apple's generators are it could well be that it is cheaper to run them most days - utilities are going to be running peaking plants then anyway which are no more efficient and Apple saves the line loss price. Generators are complex and weird. Many use more fuel at 50% of their capacity than at 80%, even though the latter is delivering substantially more power.
- pighive 8y ago
  I can agree with most of your comment, but India has changed (may not be true in all regions). It’s changing every day, there are some parts drafted as Industrial Zones with reduced/subsidized resources like land, electricity, tax incentives and water supply just for this. One such place I can think of is Sri City [0] close to Chennai. I am not sure about the current situation, but it is a good place if you are thinking about manufacturing or assembling electronics. This doesn’t mean India is going to challenge, but the conditions are much different. [0]. https://en.m.wikipedia.org/wiki/Sricity https://en.m.wikipedia.org/wiki/Sricity
- wenc 8y ago
  I can't find the latest data (Google only shows 2017 numbers), but how much of India has 24/7 power today? (I know for a while only the state of Gujarat had it; back in the day, even Bangalore didn't have 24/7 power so most multinationals that set up shop there ran their own generators)
- esmi 8y ago
  That just means I need my own generation and I put it with everything else in the cost roll up. If the economics is still there, I go.
- ratnakar007 8y ago
  This is old news. Last 10 years there has been much focus on Electricity generation and distribution. Most provinces/states have surplus power.
billfruit 8y ago
Indian government can be almost as temperamental, and it's legal system has to mature yet.
- doorbellguy 8y ago
  The legal system and govt temperament is changing very quick, India is soon going to be much more favored around the world.
  - metildaa 8y ago
    I'd love to think so, but its unrealistic to think India will suddenly mature or that global oppinions of it will change. Ridiculous court cases caused by the religious anti-hate speech laws have prevented basic health and safety concerns from being addressed: https://en.m.wikipedia.org/wiki/Hate_speech_laws_in_India https://en.m.wikipedia.org/wiki/Hate_speech_laws_in_India Nevermind the severe pollution of the Ganges (a sacred river) that has gone unmitigated. Its hard to build when the underlying infrastructure delivers dirty water, unreliable power and poor transport infrastructure. There is vast potential in India, but short of a miracle the pervasive corruption will continue to stunt societal development :c
    - ra7 8y ago
      The Ganges doesn't provide water to the whole of India. Southern India has its own water sources and there are a whole host of industries there.
      - metildaa 8y ago
        Are the water sources in Southern India safe to drink? Wrt the Ganges, iirc there was a project started a few years ago that was supposed to clean it up, yet the river is still dirty as ever. For what is such a revered river, you think that the clean up would be a prime priority.
        mallets 8y ago
sonnyblarney 8y ago
"Moving anywhere will incur a higher cost but this higher cost is temporary. This is econ 101." It is doubtful that India will ever develop the kind of ecosystem that you might find in say, Shenzhen. Those places are as different as they languages they speak. Now - maybe 'entire ecosystems' are not necessary, but for many things they are. Foxxconn is big enough to install the parts of the system they need - so long as the electricity runs, the workers show up and work, the government doesn't mess it up ...
emiliobumachar 8y ago
"but the investment [...] means that there will be a new ecosystem being built" No, I don't think so. Any one company has a negligible impact on the size of the ecosystem. If everyone moved at the same time then, tautologically, the whole ecosystem would move. But there's a coordination problem involved. Each player is incentivised to wait for many others to move before doing so. If there was just the ecosystem issues, they would all stay in China forever. If Foxconn is going there now, it somehow believes it's worth it to go now.
zjaffee 8y ago
India has to want to become a powerful manufacturing base, their current (abet informal) development model (https://en.wikipedia.org/wiki/Mumbai_Consensus https://en.wikipedia.org/wiki/Mumbai_Consensus) doesn't tend to focus much manufacturing when compared to service sector growth.
forkLding 8y ago
This isn't true, if Foxconn cared that much about forced tech transfers, democratic values and international norms, it would have stayed in Taiwan. This is rather about rising labour costs and environmental regulations. Arguably 1988 China when Foxconn entered was way worse in terms of censorship, tech transfers and nationalistic boycotts. 1989 Tiananmen happened the year after. Foxconn staying for 20 years in China is about the low labour costs. Chinese manufacturing has long been documented with moving out of China since the early 2010s and into other countries like Vietnam and even Africa because of the costs. The real killer nowadays is that China is starting to enforce more stricter environmental regulations and companies are moving out to areas that allow leniency to pollute.

asymmetric 8y ago

> without having to deal with [...] a country that is increasingly hostile to democratic values and international norms. I’m not sure this is considered a minus in Foxconn’s (and most capitalist’s) book

rohansingh 8y ago

Unfortunately I don't think it's that straightforward, specifically for moving development to India. One of the major issues for manufacturing in India is the availability of reliable electricity. Even though India now has a net surplus of electric generation, there are systemic problems with the electric grid. Some of them are due to poor infrastructure, others due to theft or corruption. But the takeaway is that a factory in India just can't run for 24 hours a day the way it can in China. This is not likely to change in the foreseeable future, even with sustained international investment. There are a ton of constituencies in India that make fixing these kinds of issues much more complicated than in China. So while a company like Foxconn may be able to setup a factory and use their considerable resources to make it work, I don't think we're likely to see the kind of ecosystem pop up that you see in Shenzhen.

potatofarmer45 8y ago
I recall talking to an old hand at Li & Fung (they're the largest contract manufacturing company in the world) and he talks of the old days where Shenzhen was literally a village with no factories, no paved roads, and no electricity. When they wanted to manufacture textiles back then, they literally had to build a factory from the ground up. It's true India has a lot of issues. But the good thing about investments like these is that it creates an opportunity for everyone involved to potentially make a change for the better. This could be the start of a new series of investment in manufacturing and the potential could batter enough heads together to fix issues like electricity reliability especially if every has a vested interest in making it work out. I'm not saying it will definitely happen, but these are the sort of gamechangers that could disrupt the status quo for the better.
- ksec 8y ago
  >Li & Fung (they're the largest contract manufacturing company in the world) May be they were, but I doubt they are the largest anymore. LF is has been selling asset after asset and their share price are now in 20 Yr's low. Basically they are a dying company.
- entity345 8y ago
  > Shenzhen was literally a village with no factories, Indeed. The thing is that China has been investing like crazy in infrastructure projects which proved crucial to develop industry and its physical supply chain. > no paved roads, and no electricity And they built all that first. I was in Shenzhen 10 years ago with an Indian colleague, its first trip to China. He was shocked when he saw that Shenzhen was a modern metropolis with large avenues as he was expecting something like in India...
- btian 8y ago
  When was that? They may be exaggerating. I was in Shenzhen in the early 90s, and there was already reliable electricity, roads, ports etc., and those were not built by Li & Fung
  - blacksmith_tb 8y ago
    Here's a set of photos from 1980[1], Shenzhen looks pretty provincial at that point. 1: https://www.flickr.com/photos/lwdemery/sets/72157611154071370/ https://www.flickr.com/photos/lwdemery/sets/7215761115407137...
- rohansingh 8y ago
  > It's true India has a lot of issues. But the good thing about investments like these is that it creates an opportunity for everyone involved to potentially make a change for the better. This could be the start of a new series of investment in manufacturing and the potential could batter enough heads together to fix issues like electricity reliability especially if every has a vested interest in making it work out. In theory this is all true, but you really have to look at the facts on the ground and the specific situation. Tons of folks have agreed with what you're saying, and poured in investment, and the situation remains really challenging. It's not for a lack of effort — India has a huge potential labor force, it's well-situated for shipping to emerging markets (like China, parts of Africa, or India itself). And, as was pointed out above, it has a strong democratic tradition that makes it appealing to Western investment. But that same democratic tradition makes it a very different situation from China. It can take literal decades to organize and satisfy all the constituencies involved for projects like a power station, factory complex, or highway construction. Labor constituencies are strong and organized enough to seriously push back against projects, and are often skeptical of foreign investment and "interference". Political parties even resort to violence to stop initiatives that they disagree with. I'm not saying that it's going to be like this forever. As a US national of Indian origin, I would be happy if the the situation was different so that I could work with manufacturing partners in India. Having some cultural and legal ties to the country would give me an advantage that I don't have when working with partners in Shenzhen or Shanghai. But it's really just not the case right now. By all means, I'm happy that this investment is happening, but I think we need to be realistic. For a manufacturing ecosystem to develop that looks anything like China does, it's going to be more on the scale of 50 years or more, not 5-10.
NicoJuicy 8y ago
Made in India 2025 is a long term commitment that will become very profitable. Since India is also a closed market, but more aligned with Western values
mywittyname 8y ago
I imagine any factory builder would take this into account and construct enough onsite power generation to maintain full operation during outages.
- sandworm101 8y ago
  A car assembly plant can pull up to 100 MVA, that is 100,000 kva or roughly 1,000,000 amps at household current. That isn't going to come from a few honda backup generators. Such power would require either a few hundred acres of solar panels attached to battery the side of a small nation, or an on-site combustion plant.
gpm 8y ago
I don't pretend to have a great understanding of what goes into building manufacturing facilities on the scale of Apple/Foxconn, but is the state of the electrical grid actually that relevant? It seems like that they would be a big enough consumer of electricity that any standard grid would struggle to accommodate them, and they would be doing things like: - Placing themselves immediately beside the power plant. - Place their own wires between themselves and the power plant. - Maybe even build their own power plants (particularly with things like solar/wind that scale down nicely).
- ticmasta 8y ago
  >> Maybe even build their own power plants (particularly with things like solar/wind that scale down nicely). Renewables in this scenario is a fairy tale. [No Renewable Subsidy] + [Shift Downside onto Public] + [Energy Demand Timing] = COAL!
reaperducer 8y ago
One of the major issues for manufacturing in India is the availability of reliable electricity. I've heard this a number of times over the last decade or so, and wonder what is it that prevents factories from running their own generators/power stations. Is fuel availability also a problem? Is is not economically feasible? There are plenty of factories in the world that have backup power sources. What's happening in India that makes this not common?
- bluGill 8y ago
  Power from generators cost substantially more than power from a large baseload power plant. Factories install backup generators, but they are not the primary source of power because it is not economical to use them that way.
  - culturestate 8y ago
    I'm not anywhere near an expert in this field, but I feel like I've been hearing a lot of noise about on-site power generation recently. Apple even (reportedly [1]) has their own on-site plant for Apple Park and only uses utility power as a backup; is there such a substantial difference between the power needs of a major corporate campus (with significant technical R&D onsite) and a manufacturing facility? 1. https://appleinsider.com/articles/12/03/10/apple_provides_additional_details_renders_for_cupertino_campus_project https://appleinsider.com/articles/12/03/10/apple_provides_ad...
    - bluGill 8y ago
      Depends. Generally with power there are elements of scale in favor of very large generation plants. Manufacturing does sometimes have their own power plants (aluminium needs a lot of power to refine) when you can cross that line. Also if the local utility is running into issues building large plants a medium sized plant might get under the regulations and so be cheaper. Of course when you run your own plant you also control the reliability - in some cases this can be worth a lot of extra cost. Utilities often give companies a large discount for having a backup generator that the utility can ask them to switch to at times of high demand: depending on how efficient Apple's generators are it could well be that it is cheaper to run them most days - utilities are going to be running peaking plants then anyway which are no more efficient and Apple saves the line loss price. Generators are complex and weird. Many use more fuel at 50% of their capacity than at 80%, even though the latter is delivering substantially more power.
pighive 8y ago
I can agree with most of your comment, but India has changed (may not be true in all regions). It’s changing every day, there are some parts drafted as Industrial Zones with reduced/subsidized resources like land, electricity, tax incentives and water supply just for this. One such place I can think of is Sri City [0] close to Chennai. I am not sure about the current situation, but it is a good place if you are thinking about manufacturing or assembling electronics. This doesn’t mean India is going to challenge, but the conditions are much different. [0]. https://en.m.wikipedia.org/wiki/Sricity https://en.m.wikipedia.org/wiki/Sricity
wenc 8y ago
I can't find the latest data (Google only shows 2017 numbers), but how much of India has 24/7 power today? (I know for a while only the state of Gujarat had it; back in the day, even Bangalore didn't have 24/7 power so most multinationals that set up shop there ran their own generators)
esmi 8y ago
That just means I need my own generation and I put it with everything else in the cost roll up. If the economics is still there, I go.
ratnakar007 8y ago
This is old news. Last 10 years there has been much focus on Electricity generation and distribution. Most provinces/states have surplus power.

billfruit 8y ago

Indian government can be almost as temperamental, and it's legal system has to mature yet.

doorbellguy 8y ago
The legal system and govt temperament is changing very quick, India is soon going to be much more favored around the world.
- metildaa 8y ago
  I'd love to think so, but its unrealistic to think India will suddenly mature or that global oppinions of it will change. Ridiculous court cases caused by the religious anti-hate speech laws have prevented basic health and safety concerns from being addressed: https://en.m.wikipedia.org/wiki/Hate_speech_laws_in_India https://en.m.wikipedia.org/wiki/Hate_speech_laws_in_India Nevermind the severe pollution of the Ganges (a sacred river) that has gone unmitigated. Its hard to build when the underlying infrastructure delivers dirty water, unreliable power and poor transport infrastructure. There is vast potential in India, but short of a miracle the pervasive corruption will continue to stunt societal development :c
  - ra7 8y ago
    The Ganges doesn't provide water to the whole of India. Southern India has its own water sources and there are a whole host of industries there.
    - metildaa 8y ago
      Are the water sources in Southern India safe to drink? Wrt the Ganges, iirc there was a project started a few years ago that was supposed to clean it up, yet the river is still dirty as ever. For what is such a revered river, you think that the clean up would be a prime priority.
      - mallets 8y ago

sonnyblarney 8y ago

"Moving anywhere will incur a higher cost but this higher cost is temporary. This is econ 101." It is doubtful that India will ever develop the kind of ecosystem that you might find in say, Shenzhen. Those places are as different as they languages they speak. Now - maybe 'entire ecosystems' are not necessary, but for many things they are. Foxxconn is big enough to install the parts of the system they need - so long as the electricity runs, the workers show up and work, the government doesn't mess it up ...

emiliobumachar 8y ago

"but the investment [...] means that there will be a new ecosystem being built" No, I don't think so. Any one company has a negligible impact on the size of the ecosystem. If everyone moved at the same time then, tautologically, the whole ecosystem would move. But there's a coordination problem involved. Each player is incentivised to wait for many others to move before doing so. If there was just the ecosystem issues, they would all stay in China forever. If Foxconn is going there now, it somehow believes it's worth it to go now.

zjaffee 8y ago

India has to want to become a powerful manufacturing base, their current (abet informal) development model (https://en.wikipedia.org/wiki/Mumbai_Consensus https://en.wikipedia.org/wiki/Mumbai_Consensus) doesn't tend to focus much manufacturing when compared to service sector growth.

forkLding 8y ago

This isn't true, if Foxconn cared that much about forced tech transfers, democratic values and international norms, it would have stayed in Taiwan. This is rather about rising labour costs and environmental regulations. Arguably 1988 China when Foxconn entered was way worse in terms of censorship, tech transfers and nationalistic boycotts. 1989 Tiananmen happened the year after. Foxconn staying for 20 years in China is about the low labour costs. Chinese manufacturing has long been documented with moving out of China since the early 2010s and into other countries like Vietnam and even Africa because of the costs. The real killer nowadays is that China is starting to enforce more stricter environmental regulations and companies are moving out to areas that allow leniency to pollute.