Trouble is, the US$10 billion in subsidies offered five years ago only spawned factories that package chips made elsewhere. Making advanced chips themselves is vastly harder, requiring cutting-edge technology, enormous amounts of capital and investors willing to endure years of uncertain returns.
India remains short of all three. Even Tata Group – Apple’s key local partner and the company behind the nation’s only semiconductor fab – is mired in a messy corporate battle for control. Its largest shareholder is questioning, among other things, the capital-guzzling nature of management’s push into electronics.
Few manage this transition successfully. Malaysia chased chip packaging and PCB assembly in the 1970s, yet it stalled after reaching upper-middle-income status in 1992. South Korea and Taiwan, by contrast, rode semiconductors into the ranks of rich economies.
HARD TO REPLICATE CHINA’S MODEL
India shouldn’t bet billions on catching a fast-moving high-tech manufacturing escalator.
It should aspire to be the world’s design centre and engineering workshop, while directing fiscal resources toward health, education, climate change – and toward labour-intensive industries such as clothing, footwear and toys that can employ millions.
China is an especially difficult model to replicate. Apple’s success there was built with the dexterity with which Foxconn’s Taiwanese founder Terry Gou, working with Chinese provincial governments, could turn paddy fields into mega-factories.
India’s cumbersome bureaucracy and its cautious tycoons will struggle to match that combination of speed, scale and risk-taking.
So no, Apple won’t turn India into the world’s next factory. It can help India acquire valuable manufacturing capabilities and move deeper into global supply chains.
But paying its suppliers ever-larger subsidies in the hope of recreating China is unlikely to be a winning trade.
