India is "forcing" computer manufacturers to move in and more than half of its imports come from China

After moving into the mobile phone industry chain, India has set its sights on computers.

After its success in "technology-for-market" mobile phones, India is going after computers, but this time with a different approach.

The Indian government suddenly announced on August 3 that it would restrict the import of personal computers, including laptops and tablets, and that companies would need to apply for a license in advance to be exempted, and the restriction order would take effect immediately.

The sudden government order caught the major computer manufacturers in the world by surprise. However, the next day, India's General Directorate of External Trade (DGFT) changed its tune, saying that it would give companies a three-month grace period and that the import restriction order would come into effect on November 1.

Chen Jing, vice president of the Society of Science and Technology and Strategy, told the First financial reporter that it is obvious that India wants to promote its successful experience in the mobile phone industry to the computer industry, use the Indian market, attract the computer industry to set up factories in India, and transfer the industrial chain and supply chain from China and other countries.

Eyeing the computer industry

The government did not explain the reason for the new rules in the restraining order, but Rajeev Chandrasekhar, Minister of state at the Ministry of Electronics and Information Technology, said:

India is becoming one of the fastest growing electronics markets in the world and the new measures are aimed at "securing access to trusted computer hardware and systems" and reducing reliance on imported products.

At present, India gives computer manufacturers a three-month grace period, not as a mercy, to a large extent to prevent the Indian market in the short term, the supply of personal computers. After the restriction order was issued on Wednesday, PC giants such as Apple, Samsung and Hewlett-Packard have suspended PC exports to India due to the policy uncertainty.

in fact, with the Modi government's "Make in India" (2014) and "Atmanirbhar" (2020) initiatives emphasizing local manufacturing, major PC manufacturers have been making some preparations to reduce import dependence and promote local production.

Previously, India used the lever of tariffs to gradually force foreign mobile phone companies to settle in India, and personal computer makers had thought that the Indian government would take such a gradual route in the future, but do not want to take the unusual road this time, without warning, the Indian government issued a restriction order.

After that, PC makers immediately communicated with the Indian government. Industry insiders said that with India's administrative efficiency, all kinds of computer products will need to wait a long time to return to the Indian market, and because of the existence of the licensing system, the launch of new products in the Indian market may be much later than the international market.

These considerations, in particular, could ultimately prompt the government to delay the restriction by three months, especially with the fall school year and the upcoming Diwali shopping season in October, when consumer demand for personal computers is expected to surge.

In addition, Chen Jing also told the first financial reporter that he noticed that India's policy has been subdivided, and imports of computers as productivity tools have also been exempted, and computers for scientific research and personal consumption have been distinguished to prevent accidental injury to India's productivity.

At present, there are no well-known PC makers in India, and global brands such as HP and Dell currently do limited assembly in India. In the first half of this year, the top five notebook market shares in India were HP, Dell, Lenovo, Acer and Asus. The top five tablets are Samsung, Apple, Lenovo, Realme and Acer.

In the second quarter of this year, India's imports of electronics including personal computers amounted to $19.7 billion, up 6.25% from the same period in 2022. China imports 80 percent of laptops sold in India and about two-thirds of tablets, according to a report by Ernst & Young.

According to the latest available customs data, in the first five months of 2023, China's laptop exports totaled 29.420 billion US dollars, and the top five countries/regions in terms of exports were the United States, the Netherlands, Germany, Japan and India.

Shares in electronics contract manufacturers such as Dixon Technologies of India jumped on news of the order. However, Chen Jing told the first financial reporter, computer assembly and mobile phone assembly has different characteristics, computer production than mobile phone manufacturing has higher requirements, the most important indicator is the computer failure rate, India can not put the computer assembly well, there are not too many empirical cases.

Chen Jing further analyzed that India's move is too anxious and strong, the computer industry is already a quite mature market, the transfer of the industrial chain is more difficult than mobile phones. At the same time, compared with mobile phones, the current Indian computer market is not so large, its price for the average Indian family, is not easy to bear, computer manufacturers in whether to transfer the industrial chain, will take the above factors into account.

The Mobile and Electronics Association of India has previously acknowledged in its report that the global manufacturing centers for laptops and tablets are limited to a few countries, while China is the major global supplier.

Tighten the layout

In March 2020, India launched the Production-Linked Incentive Scheme (PLI) to create a mobile phone manufacturing hub in India. The first phase focuses on mobile phone manufacturing, electronic components and manufacturing. By November 2022, the production-linked incentive Scheme has been extended to 14 major manufacturing sectors in India.

The Indian government provides heavy subsidies to companies participating in production-linked incentive schemes to increase domestic production in strategic sectors where India has a comparative advantage, including forming resilient supply chains, enhancing manufacturing competitiveness and boosting exports. Some Indian scholars even refer to this as the "alternative Chinese industry" plan.

In 2021, India launched a production-linked incentive program worth about $900 million to encourage computer products such as laptops and tablets to be manufactured in India, hoping that global computer giants will bring advanced manufacturing technology to India.

However, the subsidy was seen as too small to be attractive. According to media reports, Apple has rejected the incentive plan, believing that even if there is a subsidy, it is not enough to make up for the company's loss of iPad production in India.

Undeterred, the Indian government announced in May that it would more than double the size of the production-linked incentive program to $2 billion.The government says the incentive program is key to India becoming a "global electronics manufacturing hub," targeting a total output value of $300 billion by 2026.

However, the number of companies attracted this time is still limited, the effect is not good, the Indian government has to extend the application deadline to August 30. The restriction may be intended to urge foreign companies to apply to join the scheme.

At the same time, Indian brands are eager to capture the domestic market. On July 31, Jio, a subsidiary of Reliance Group, launched its latest low-cost laptop, Jio Book, which is priced at Rs 16,499 (about 1433.6 yuan) by Amazon.

But even if it is an Indian brand, many accessories in the notebook are produced and provided by Chinese enterprises, and now under the license system, it may further increase the cost and difficulty of production, and it is more likely to hurt Indian local enterprises.

In addition, nowadays, many computer manufacturers have successfully transferred their industrial chain to Vietnam, and to a certain extent, they have also "stimulated" India. Compal, one of the world's largest notebook computer makers, bought land in Vietnam in June to open a third factory. Compal is a longtime supplier of Macbook, iPad and iWatch to Apple Inc.

According to the Industrial Intelligence Institute (MIC), a think tank, Southeast Asia, centered on Vietnam and Thailand, will account for about 50 percent of global notebook computer production by 2030.