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Regional Shifts in the Global Tech Supply Chain

Oct 18 2016

The new normal of low growth rates is clear. We are unlikely to resume to the double-digit levels once experienced – at least for a while. Saturation across tech verticals, notably smartphones, is also expanding. However, despite these gloomy outlooks, there are markets where strong growth is still on the event horizon: emerging markets.

While the BRIC (Brazil, Russia, India and China) growth debates continue and the ever-anticipated “leap frog” adoption of new high-tech devices has yet to be realized (outside of some Asian countries such as China), there are clearer signs now that change may finally be afoot. India’s Prime Minister Narenda Modi’s “Make in India” campaign, as contextualized for the semiconductor industry in EPS News, is spurring tech manufacturing and ensuring the migration of factories to India. Most recently, Huawei announced that it is partnering with Flex India for the manufacture of its smartphones for the Indian market, as reported by Mobile World Live:

Chinese telecoms equipment and smartphone vendor Huawei will start producing Honor smartphones in the Indian city of Chennai early next month.

The Shenzhen-based firm said it is partnering with Flex India, a unit of global electronics manufacturer Flextronics International, to manufacture one of its Honor models at the plant in southern India, which will have a capacity of three million units by the end of 2017.

 In the wake of the 2008 global recession, the ability to stimulate potential growth has lagged in India. Modi’s campaign was developed as an antidote. The results are clearly positioning India for real growth in various markets. The case in point is the opportunity to propel India as a rival to China for smartphone adoption and global growth. The likelihood of India becoming the second largest smartphone market is real. After all, with Flex India in full swing, Huawei is not the only OEM working to produce for the Indian market. Apple’s strategic moves are equally clear.

The news of Huawei’s manufacturing agreement is important for the global tech supply chain. The announcement comes at a time when the Chinese market is seeing continued slower growth and manufacturers are eager for broader opportunities globally.

India, like China, holds a very different position among the world’s emerging markets, and furthermore, it holds real differences from China, differences that position India for a very bright high-tech future in its own right. More specifically, India’s traditional strength in software and services are now poised to join with tech manufacturing and will appeal to the already astute high-tech consumer through global brands that have the Make in India credibility. This puts India on a fast track to reaching China and the U.S.’s status as global smart device leaders and market growth opportunities for international companies that are moving operations to India.

Simultaneously, because of the Indian government’s campaign, the increase in revenue will further contribute to infrastructure and related improvements that will propel India more rapidly into key economic positions globally.

Not only are tech manufacturers increasing their confidence level for growth in India, the broader high-tech markets that Modi was eager to attract are also entering the Indian market. Oracle, for example, recently announced plans for a new  data center in India. Oracle’s co-CEO Mark Hurd recently commented on Oracle’s vision for India’s strong growth to EconomicTimes.com:

The dynamics that excite us about any market is the scale of the market size. Yes, economy is important for us, and India's economy is only growing. India is on the path of modernisation of its infrastructure, and this usually has an effect on IT. So, as you get any type of scaled economy that is growing, that has modernisation opportunities and productivity opportunities, it becomes a very attractive market for a company such as Oracle. If you can supplement that with an educated country where there is availability of talent such as that is in India, it becomes very exciting.

Growth in today’s global market is, in fact, not stuck in the doldrums that it might appear from a U.S.-EU centric lens. Finally, the anticipated opportunities of leading emerging markets, like India, are taking hold. Given the multipolar economic connections, growth in India also holds promise for paving the way for other emerging markets in its wake.

By Lisa Cairns via EPS News

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