Nobody moves house if they don’t want to, or don’t have to: it’s expensive, disruptive and you’ll probably end up with more grass to mow. So just imagine how disruptive and expensive it is to move a multi million dollar production facility from one continent to another: that’s exactly what Samsung did this month when it announced the relocation of its key Display Manufacturing Unit from Noida in China to Utter Pradesh (https://news.samsung.com/). And given we might assume the Chairman of Samsung has only a passing acquaintance with downtown Lucknow, why did he green light all that extra expense and disruption? The Samsung delegation weren’t mincing their words (or hiding their intent), so you don’t need to look far for the answer: India, they said, has “a far better industrial environment and more investor friendly policies”. They’ve got a point there…in fact they’ve got two points.
And Samsung certainly aren’t alone in targeting India as an increasingly more attractive, and more business friendly environment than China.
No fewer than twenty-four technology companies have already decided this year to relocate operations from China to the subcontinent: not only Samsung, but Apple and Foxconn too, which (as a major Apple supplier) plans to invest $1 Billion in a new plant near Chennai over the course of the next three years: an unidentified source told Reuters this month that “There's strong pressure from Apple for its partners to move part of iPhone production out of China", and that’s not a suggestion Foxconn are likely to ignore any time soon.
And, inevitably, there’s Amazon too: earlier this year Jeff Bezos announced a $1 billion investment to bring small and medium sized Indian businesses online, and that’s on top of £5.5 Billion invested over previous years, which has seen the subcontinent emerge as one of the company’s most important markets outside the United States, and a key driver for future growth. Amazon already employs more than 60,000 people in India, 15,000 of them at its mammoth new “Campus” in Hyderabad…and in that context the drift away from China starts to look irreversible.
Of course the recent choppiness in US Sino trade relations hasn’t helped Beijing any, but there’s more to it than that (much more): the drift away from China is also about a need to diversify increasingly fragile supply chains, building on the success of India as a global manufacturing hub, and drawing on the skills of some of the best technology workers in the world (think Hyderabad and Chennai): and you can’t leave out of account either the incentives currently being offered by Prime Minister Modi’s Government, especially the Production Linked Investment Scheme (www.investindia.gov.in), which has pledged $26.3 Billion to boost domestic technology production. Following its introduction in March this year, the Atmanirbhar Bharat Programme is expected to generate more than $500 Billion in large-scale electronics production over the course of the next five years (with pharmaceuticals, automotive and textiles all slated to follow for inclusion). That means one million more jobs for Indian workers.
So, for India at least, that drift to the south can only be good news…whether Beijing will agree is quite another matter.
Mainstream Impact Investment is the leading model for future investment strategies across the globe: recognising, as it does, that robust and compliant businesses are better placed for long-term success in our changing world. And that’s the model Red Ribbon Asset Management (www.redribbon.co) has adopted for more than a decade: securing higher than average rate investor returns, and looking after the planet in the process.
Executive Overview
Samsung’s decision to relocate to India is a major straw in the wind for what has already become a steady drift away from China into the subcontinent. It looks like a perfect storm for growth and I can’t wait to see what happens next.
Invest in Red Ribbon Asset Management
Red Ribbon is committed to identifying and building on investment opportunities that are fully in compliance with its core Planet, People, Profit policy: not only offering above market rate returns for investors but also protecting our Natural Capital.
Leave a Reply