The current status of the Indian industrial chain after the lockdown

The second wave of the epidemic in India was so fierce that no one expected it. At the peak, the number of new cases per day once reached 400,000. In order to prevent the further spread of the epidemic, a series of "lockdown orders" were implemented in many parts of India. Along with the development of the epidemic, the local economy and industrial development were also restricted; the mobile phone industry, which had just slowly recovered from the first round of the epidemic, was hit again.

Under the above background, in addition to fighting the threats posed by the epidemic itself, manufacturers in the industrial chain also have to face the pressure brought about by chain reactions such as reduced customer orders and increased factory operating costs. Jiwei.com has previously reported that many smaller companies can no longer bear it and have to choose to withdraw their investments in India.

By early June, thanks to the advancement of prevention, control and vaccination, the epidemic in India has improved to a certain extent, and many regions have been unsealed. From the perspective of the industrial chain, it seems to be a turnaround.

Actively resume work and production

Jiwei.com learned that as many places in India have lifted the lockdown, the country has begun to issue visas to China one after another. However, work visas are still the main type of visas, and business visas are still suspended. Even so, as relevant departments have tightened the approval process for visa issuance, it is quite difficult for Chinese employees to apply for work visas to India.

Wen Taikun, general manager of Holitech India Branch, said: "The relevant departments will make a comprehensive assessment to decide whether to issue a work visa based on the applicant's professional and job matching, tax payment in India, the company's investment scale in India, the proportion of employment that the company can create, and other factors. Therefore, at this stage, Chinese employees' application for work visas to India also faces problems such as long application time, high difficulty, and high rejection rate; according to what we have learned, the current rejection rate for work visas is as high as 40%."

Although the road is long, you will reach your destination if you keep walking.

Although the visa application process is not easy, many Chinese companies investing in India are still actively preparing. On the one hand, they are sending domestic management and technical employees to India, and on the other hand, they are resuming work and production in local factories to the greatest extent possible.

A senior industry insider revealed: "Although the epidemic situation has improved compared with the previous two months, Chinese companies are still more aware of protection. Therefore, many factories dare not resume work on a large scale for fear of causing large-scale infection. At this stage, the general resumption rate of Chinese factories in Uttar Pradesh is about 45%-50%."

It is reported that the Greater Noida area in Uttar Pradesh is home to many global manufacturing factories, and the types of products produced in the area have covered multiple links in the mobile phone industry chain, including complete machines, chargers, adapters, camera modules, battery components, etc. It can be said that the trend of the epidemic in the region has an impact on the development of the local mobile phone industry chain that cannot be ignored.

In this regard, a local Chinese-funded enterprise pointed out: "In fact, the areas with high incidence of the epidemic in India are more concentrated in southern cities. On the contrary, the situation in Uttar Pradesh has improved significantly. After the lockdown was lifted, economic activities in places including Delhi and Greater Noida have gradually recovered. From our point of view, the degree of recovery is almost the same as before the first round of the epidemic."

In summary, the improvement of the epidemic in India in the short term has led to signs of a gradual recovery in the local industrial chain; however, the complexity and volatility of the epidemic has also brought many risks and challenges to this "warm wind". Whether to stay or go has become the primary question facing many companies.

The “Issue of Staying or Going” in a Protracted War

As everyone knows, the epidemic and China-India relations are two key factors in measuring the investment value of the Indian market. At the same time, both factors are highly uncontrollable.

First, let's look at India's boycott of China due to the relationship between the two countries. Industry insiders believe that "in the short term, the direction of the relationship between the two countries is unclear, and it may even remain tense for a long time. However, for the smartphone industry, Chinese brands have absolute advantages in India in terms of market share, technology, supply chain resources, etc., and these advantages cannot be replaced by India in the short term."

Even though there was extreme anti-China sentiment among the local people due to the relationship between the two countries, the results showed that this sentiment did not cause any splash in the mobile phone market.

According to data released by market research firm Canalys, in the first quarter of 2021, the Indian smartphone market grew by 11%, with total shipments reaching 37.1 million units. Among them, Xiaomi became the best-selling brand in the Indian smartphone market with a market share of 28%, followed by Samsung, vivo, OPPO, and realme. Four of the top five seats were occupied by Chinese brands. In the second quarter of 2021, India's smartphone shipments increased by nearly 90% year-on-year to 32.4 million units. Xiaomi still topped the list with a market share of 29%, followed by Samsung, vivo, realme and OPPO.

Even though the market share of the above-mentioned companies has changed to a certain extent due to the impact of multiple negative factors including the relations between the two countries, the epidemic, and the global chip shortage, what remains unchanged is that Chinese mobile phone brands and their supply chains still dominate the Indian market.

Secondly, let’s look at what changes the subsequent epidemic may bring to the industrial chain.

As mentioned above, the epidemic situation in India has improved to some extent at present, but the progress of local vaccination is very slow. If this continues, the economy and the development of various industries will inevitably be negatively affected.

Taking smartphones as an example, Jiwei.com has previously mentioned in a report that since last year, sales of feature phones in India have increased significantly; as the country's epidemic prevention and control work unfolds, India's trend of transitioning from feature phones to smartphones will not change, but under the premise that the epidemic has caused an impact on the national economy, this trend may slow down significantly.

Considering all the above, the Indian market is undoubtedly full of opportunities; however, given the two long-standing risks of Sino-Indian relations and the epidemic, companies investing in India may have to prepare for a protracted war.

Finally, Liu Xiaodong, representative of the China Council for the Promotion of International Trade (CCPIT) India Office, gave advice on whether to stay or go in the industry chain: "I think India's demographic dividend and market potential are unquestionable, but the issue of whether Chinese companies in India should stay or go still needs to be considered in light of the actual situation of the companies. If they have financial conditions and capital strength, I would advise them to stick to it. Because the bad situation will not last forever, relevant national departments and units, and upstream and downstream companies in the industry chain are working together to improve the investment and operating environment for Chinese companies."