Will India become the jewel in the crown for EMS providers seeking low-cost manufacturing opportunities? Or will China lay permanent claim to the title of world's largest high-tech production hub?
These are questions that a handful of global contract manufacturers are asking themselves as they probe the subcontinent for signs that India's robust economic growth is creating a climate for sustained investment. As EBN senior editor Claire Serant writes in this week's issue (see "India's opportunity" on page 25), the appeal for EMS providers is apparent given that the country
boasts a large English-speaking population that has already created a powerhouse in the areas of software development and supplemental hardware design. The prevailing wages approximate those in China, where pressure is mounting for them to be increased, and the Indian government is at least discussing substantive trade and banking reforms.
Yet India poses several challenges for investors. The country has a notable lack of infrastructure, particularly in the all-important areas of telcommunications and power, while a ponderous bureaucracy heavily regulates industry.
It will be interesting to watch how or whether India addresses these problems and if by doing so it can secure new investment from the EMS community. As a nominal democracy, India could have a much harder time than communist China, where the government, for example, is orchestrating a series of mammoth public works improvement projects while relocating millions of its citizens to eastern industrial zones in an unprecedented mass migration.
Also worth considering is the fact that, after India, there are few other developing nations with a comparable population of technically trained, low-wage workers. What will it mean for the productivity levels of EMS providers when they are no longer able to hopscotch around the world in search of the next best manufacturing locale? Moreover, what will the rise of India as a manufacturing heavyweight mean for other production hot spots like Eastern Europe and Brazil?
When China began to undermine Mexico as an EMS destination, it was soon apparent that after a decade of investment in the maquiladora model, Mexico was left with no lasting high-tech legacy, no residual home-grown electronics industry capable of running under its own steam.
Indeed, apart from Ireland and now China, few countries that have attracted the EMS sector have managed to parlay that opportunity into an indigenous electronics industry.
How big an impression India makes on the world manufacturing stage remains to be seen, but it will certainly influence a new set of market dynamics.
E-mail comments to Andrew MacLellan at email@example.com.