📰Can India Really Be the New China?

June 06, 2025

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Good afternoon, 

Analysts in Washington want to shoo-in India for China. India would love nothing more. Seems easy on the surface, India is home to the world’s largest, youngest, and cheapest workforce, yet a crucial problem remains: everything else. Today, we investigate the challenges India faces in taking over China in manufacturing.

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Market Update.

The Difficulty of Moving Chinese Production to India.

Amid growing tensions between the U.S. and China, a simple solution has gained traction in Washington and boardrooms alike: “Move production from China to India.” On the surface, it sounds logical. China dominates global manufacturing, and its political rivalry with the U.S. has made that dominance increasingly uncomfortable. India, with its massive, cheap, and young population seems like a shoo-in to be the “next China.” But this narrative oversimplifies a far more complex reality. Shifting the final assembly of an iPhone—or any high-value product—from China to India isn’t just a matter of geopolitics. It’s a test of whether India can match the scale, efficiency, and ecosystem China has spent decades building.

A key word: To begin with, there is a fundamental distinction between “assembly” and “production,” a fact Apple has been at pains to exploit in public discourse. When executives suggest they are moving “assembly” to India, they deliberately avoid using the term “production” because the bulk of an iPhone’s value lies in literally hundreds of component parts, many of which have no practical substitute outside China’s well‐oiled supply clusters. Final assembly might indeed be relocated to India, but that alone does not significantly disrupt China’s vast hold on iPhone production. If a phone requires a thousand unique components, shifting only the last few seconds of the assembly line to India allows for the “Made in India” stamp to be applied (and thus, steep tariffs on China to be avoided).

How China got here: Over the past two decades, dozens of multinational engineers flew to China daily, embedding Western quality control routines in local suppliers, ironing out kinks, and accelerating processes that elsewhere would have taken months of bureaucratic or infrastructural work. Sources can even recount how Apple engineers would return the next morning to find that entire lines of heavy machinery had already been moved out of the way. Therein lies the Chinese speed, with provincial governments willing to clear land rights overnight, and Xi Jinping’s brand of urgency. 

By contrast, India’s manufacturing ecosystem has never benefited from that same combination of government facilitation, top‐tier engineering talent, and hyper‐competitive subcontractor environments. As engineers working for Apple’s teams have discovered, traveling between New Delhi‐area offices and factories in Tamil Nadu often entails four hours of commuting on roads that remain perpetually congested, with intermittent Wi‐Fi coverage that would cripple any just‐in‐time production system dependent on real‐time data analytics. Local factories, at least until recently, lacked the sprawling industrial parks and eight‐lane highways that characterize China’s Pearl River Delta, and regulatory hurdles (environmental clearances to labor approvals) tend to stretch timelines endlessly. Even sourcing a single key part, like a custom‐molded glass module, can demand multiple iterations of trial runs and retooling, rather than a swift overnight swap.

That disparity in local ecosystems is only part of the story. Equally important is the sheer scale of production. Apple began assembling iPhones in China back in 2007; by 2015, China’s Foxconn plants were churning out over 230 million phones per year. By contrast, India’s iPhone assembly lines from 2017 produced roughly 25 million units by 2023. In relative terms, India’s “diversification” is happening at roughly one‐tenth the pace of China’s original iPhone boom. Additionally, while Apple has made technical leaps, Chinese factories have largely powered this innovation, making India primarily play catch-up. 

India’s incentives: For India’s approach, the government has tried to underwrite a shift of global supply chains through initiatives like “Make in India” and the PLI scheme, which reimburses up to 20 percent of incremental sales for certain pharmaceutical or electronics products. In the smartphone space, Apple’s local partner (currently Foxconn and now also Tata Electronics) has benefited from tax breaks and reduced import duties on components. Yet these incentives are limited: India’s warehouses still require months of red tape, land acquisition rarely happens overnight, and bureaucratic approvals — even for “strategic national projects” — can take years. Those local brakes exist precisely because India’s economy is more contested, with multiple stakeholders insisting on environmental reviews, labor protections, and transparent governance. 

More fundamentally, India lacks China’s industrial clusters, a dense network of suppliers located within fifty miles of each other, all linked by eight‐lane highways, high‐capacity ports, and private power grids. Even if Apple wished to replicate that density, it would require fifteen to twenty years of continuous investment, coordinated land planning, and a willingness to absorb short‐term losses until scale economies kick in. Any large FDI project, especially one involving thousands of migrant factories, would draw scrutiny from labor unions, environmental activists, and local communities. Even if Modi’s government manages to cut red tape on land acquisition and fund new bulk manufacturing parks, each new factory must pass multiple layers of state and national environmental impact assessments. 

India’s silver lining: Despite these daunting obstacles, the U.S. has signaled it will continue to court India as a potential manufacturing partner, especially for semiconductors. The CHIPS Act’s incentives extend to companies willing to set up R&D centers or packaging facilities in India. Washington’s underlying assumption is that reducing reliance on China is a long‐term project, unfolding over decades, and every investment in India’s capacity is a strategic step toward a more resilient global supply chain. For Apple, which posted roughly $100 billion (₹8.6 trillion) in free cash flow, setting aside $1 billion (₹86 billion) to fund a new Indian assembly campus seems almost inconsequential. But for India, where per capita GDP is around $2,900 (₹249,400), the presence of a single multi-billion-dollar Apple campus can have an outsized impact, helping to build managerial expertise that might otherwise drift toward the service sector.

In the years ahead, the true litmus test of India’s emerging electronics sector will not be headline figures about 25 million iPhones assembled, but rather whether Indian firms can graduate from the assembly line to innovators. Seeding home-grown R&D centers developing chips, display technology, and new batteries will prove that global supply chains are transforming. Without that piece, India will only be assembling a product under extreme supervision.

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Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.