India Defers Import Restrictions on Electronics, Divergent Approaches by Taiwanese and American Brands

According to reports in the Indian media, India has decided to delay the implementation of import restrictions on electronic products such as laptops, tablets, and servers. This delay pushes the commencement date to November 2023. As a result, Taiwanese, American, and Chinese laptop manufacturers are now reevaluating their production strategies in India and expediting their applications for importing electronic goods.

TrendForce Insights:

• Minimal Impact of India’s Import Restrictions on American Laptop Brands

In the past, the Indian government has employed strategies like raising tariffs and offering incentives to encourage local electronic manufacturing, attracting major global players to invest in domestic facilities. Notably, Chinese brand Xiaomi successfully collaborated with the local company Radiant Technology to produce smart TVs in India. Another success story involves the local production of iPhones, which established a mobile phone industry chain within India. India now aims to replicate these successful trade strategies in the computer industry.

In May 2023, India offered a $2 billion incentive to entice global laptop manufacturers to establish local factories. However, due to the absence of a complete laptop manufacturing supply chain in India and the continued concentration of American brands’ production in China, their interest in investing in India remains limited.

While India is imposing import restrictions on computer products, it is also actively promoting the “Made in India” initiative. This initiative, initiated in 2015 with the Phase Manufacturing Program (PMP), has set a goal of increasing the manufacturing sector’s GDP contribution to 25% by 2025.

In 2023, India offered $2.1 billion in funding and incentive programs for local production, attracting major manufacturers like Dell, HP, Acer, ASUS, and Lenovo to apply by the end of August. The incentive programs offers a 5% subsidy on the ex-factory price for manufacturers using components from Indian suppliers, with even more substantial incentives for utilizing local components.

After the implementation of this plan, brand manufacturers will still need to ensure the quality of components meets standards. It’s anticipated that if the same quality cannot be achieved within the supply chain, they will continue importing complete laptops into India.

India relies on foreign imports for approximately two-thirds of its laptops, with local laptop shipments constituting only 3% of the global market. Consequently, American laptop manufacturers exhibit relatively low interest in investing in India. Additionally, HP, Dell, Apple, and other American brands primarily maintain their production centers in China in 2023, designating Vietnam and Thailand as secondary laptop production locations. Consequently, they are less affected by India’s import restrictions on electronic products.

• Vietnam’s Manufacturing Trumps India’s in Laptop Production

Taiwanese assembly giants, Quanta and Foxconn, have shifted their investments to Vietnam in response to strategies employed by American brand manufacturers. Now, due to India’s import restrictions in the laptop industry, Acer and ASUS, which emphasize local collaborations, are feeling the market impact.

The repercussions for Taiwanese manufacturers include challenges in liquidating inventory from early production, restrictions on the quantity of imported electronic products, and increased costs due to tariff barriers. These developments will affect the trading dynamics in the electronics industry and potentially reshape the commercial relationships of multinational corporations.

While India aspires to import components locally and then assemble them, there is currently no well-established industrial supply chain in Vietnam. The prospect of large-scale production of products such as laptops, tablets, all-in-one computers, and servers in India in the short term seems improbable.

Taking the example of laptop production in Vietnam, there exists a well-coordinated supply chain for components like panels, surface-mount technology (SMT), and electronic mechanical components necessary for the entire assembly. Furthermore, Vietnam’s proximity to China, coupled with favorable import tariff policies, results in significant cost savings in material and equipment transportation. Consequently, in the laptop market, Vietnam enjoys a competitive edge over India, with less vulnerability to shifts in the national political landscape.