India is “long memory” this time.
After Trump threatened to impose a 100-percent tariff on China from November 1, India showed a surprising calm from top to bottom, not "hoping up and down" like the last time, and even wanted to prove power to the United States by hitting Pakistan, thereby undertaking China's production capacity.
First of all, when India's last "receiver drama" was loud, when the United States first imposed tariffs on China in 2019, India shouted "to replace China as a global manufacturing center."
More than 100 "special economic zones" have also been specially designated to exempt enterprises from taxes and land fees, and even said that "30% of China's low-end manufacturing orders can be robbed in three years".
At the time, there were a lot of foreign-invested enterprises, Samsung, Apple went to India to build factories, and the Indian media still whispered every day "The Indian version of the iPhone to rule the world."
As a result, Apple's factory in India can not guarantee even the basic good product rate, the Chinese factory can do 95% good product rate, the Indian factory at the beginning of only 60%, the cost of light return is 20% higher than in China.
Samsung's factory in India is worse, because the supply chain is broken, the cell phone shell has to pass from China, the shipping costs are more expensive than the raw materials themselves, and in the end, the cost of production in India is almost 30 percent higher than in China.
After two years of struggle, India not only failed to grab many orders, but also allowed foreign-funded companies to see clearly its shortcomings. Many companies quietly moved production capacity back to China.
This time, India can hold its breath. First of all, it understands that "taking over is not cost-effective at all." Trump added a 100% tariff this time, which is much harder than last time, but India knows in its heart that even if Chinese enterprises want to move out because of tariffs, it is not their turn.
China's manufacturing advantage has never been "relying on low prices to grab orders", but on the complete industrial chain. For example, producing a mobile phone, from chips and screens to batteries and casings, all parts can be equipped in one day in China, and transportation costs only account for 2% of the total cost.
But in India, just to find the injection molding factory for mobile phone cases and the assembly factory for screens, it takes three or four days to transport, and you have to worry about logistics delays on the road.
Before, a Chinese electronics company tried to move part of its production capacity to India. As a result, the whole production line was stopped for a week due to the lack of a small part, and finally it was solved by transferring goods from China.
Now the U.S. tax hike is greater, Chinese enterprises even if they want to move, will prioritize Vietnam, Malaysia and more mature industrial chains, India even the "alternative list" is not numbered, and naturally does not get excited.
Last time the U.S. raised taxes, India's textile factories and electronics factories stacked up production, some enterprises even borrowed profitable loans to buy equipment and build factories, and the result of the order didn't wait much, but were pressured by costs.
One of India's largest textile companies, Aravender Textile, spent US $200 million to build a new factory in 2020. In the end, due to the lack of dyes and skilled workers, half of the factory was idle, and the loan could not be repaid, and it almost went bankrupt.
Now that Indian companies have learned wisdom, they have not seen real orders, and no one dares to blindly expand production. After all,"surviving is more important than seizing false fame."
In fact, the essence of India's calm is the sobriety of the illusion of "replacing China". In the past, India always felt that "what China can do, so can India", but after several attempts, it was discovered that the manufacturing industry can't be done by shouting slogans.
China has spent decades building its entire supply chain, cultivating skilled workers, and improving infrastructure, which are not something India can catch up with in the short term.
Like Vietnam, although the industrial chain is not as perfect as China, but at least there is a stable electricity, smooth logistics, and a large number of trained workers, India even these most basic conditions have not met, but want to step up the sky, is not realistic.
This time India can sink, indicating that it finally understands: instead of following America blindly, it is better to fix its own industrial chain shortcomings, otherwise even if there is a chance, it will not be able to grasp.
The division of labor in the global manufacturing industry is not a "zero-sum game". It is not that if China is less, India can be more. Instead, it depends on strength. Whoever has a complete industrial chain, has an advantage in cost, and has high efficiency can get the order.
China's manufacturing advantages are the result of decades of accumulation, and if India wants to develop manufacturing, it must sink to fill the shortcomings, rather than rely on the "trade war" of the United States.
This time India did not follow the U.S. impulse, indicating that it finally started to shift from “fantasy” to “practical”, which is more important to India’s long-term development than taking a few short-term orders.
If India is able to maintain this “calm” and effectively replenish the industrial chain, build infrastructure, and train workers, it may find its place in some areas in the future.
After Trump threatened to impose a 100-percent tariff on China from November 1, India showed a surprising calm from top to bottom, not "hoping up and down" like the last time, and even wanted to prove power to the United States by hitting Pakistan, thereby undertaking China's production capacity.
First of all, when India's last "receiver drama" was loud, when the United States first imposed tariffs on China in 2019, India shouted "to replace China as a global manufacturing center."
More than 100 "special economic zones" have also been specially designated to exempt enterprises from taxes and land fees, and even said that "30% of China's low-end manufacturing orders can be robbed in three years".
At the time, there were a lot of foreign-invested enterprises, Samsung, Apple went to India to build factories, and the Indian media still whispered every day "The Indian version of the iPhone to rule the world."
As a result, Apple's factory in India can not guarantee even the basic good product rate, the Chinese factory can do 95% good product rate, the Indian factory at the beginning of only 60%, the cost of light return is 20% higher than in China.
Samsung's factory in India is worse, because the supply chain is broken, the cell phone shell has to pass from China, the shipping costs are more expensive than the raw materials themselves, and in the end, the cost of production in India is almost 30 percent higher than in China.
After two years of struggle, India not only failed to grab many orders, but also allowed foreign-funded companies to see clearly its shortcomings. Many companies quietly moved production capacity back to China.
This time, India can hold its breath. First of all, it understands that "taking over is not cost-effective at all." Trump added a 100% tariff this time, which is much harder than last time, but India knows in its heart that even if Chinese enterprises want to move out because of tariffs, it is not their turn.
China's manufacturing advantage has never been "relying on low prices to grab orders", but on the complete industrial chain. For example, producing a mobile phone, from chips and screens to batteries and casings, all parts can be equipped in one day in China, and transportation costs only account for 2% of the total cost.
But in India, just to find the injection molding factory for mobile phone cases and the assembly factory for screens, it takes three or four days to transport, and you have to worry about logistics delays on the road.
Before, a Chinese electronics company tried to move part of its production capacity to India. As a result, the whole production line was stopped for a week due to the lack of a small part, and finally it was solved by transferring goods from China.
Now the U.S. tax hike is greater, Chinese enterprises even if they want to move, will prioritize Vietnam, Malaysia and more mature industrial chains, India even the "alternative list" is not numbered, and naturally does not get excited.
Last time the U.S. raised taxes, India's textile factories and electronics factories stacked up production, some enterprises even borrowed profitable loans to buy equipment and build factories, and the result of the order didn't wait much, but were pressured by costs.
One of India's largest textile companies, Aravender Textile, spent US $200 million to build a new factory in 2020. In the end, due to the lack of dyes and skilled workers, half of the factory was idle, and the loan could not be repaid, and it almost went bankrupt.
Now that Indian companies have learned wisdom, they have not seen real orders, and no one dares to blindly expand production. After all,"surviving is more important than seizing false fame."
In fact, the essence of India's calm is the sobriety of the illusion of "replacing China". In the past, India always felt that "what China can do, so can India", but after several attempts, it was discovered that the manufacturing industry can't be done by shouting slogans.
China has spent decades building its entire supply chain, cultivating skilled workers, and improving infrastructure, which are not something India can catch up with in the short term.
Like Vietnam, although the industrial chain is not as perfect as China, but at least there is a stable electricity, smooth logistics, and a large number of trained workers, India even these most basic conditions have not met, but want to step up the sky, is not realistic.
This time India can sink, indicating that it finally understands: instead of following America blindly, it is better to fix its own industrial chain shortcomings, otherwise even if there is a chance, it will not be able to grasp.
The division of labor in the global manufacturing industry is not a "zero-sum game". It is not that if China is less, India can be more. Instead, it depends on strength. Whoever has a complete industrial chain, has an advantage in cost, and has high efficiency can get the order.
China's manufacturing advantages are the result of decades of accumulation, and if India wants to develop manufacturing, it must sink to fill the shortcomings, rather than rely on the "trade war" of the United States.
This time India did not follow the U.S. impulse, indicating that it finally started to shift from “fantasy” to “practical”, which is more important to India’s long-term development than taking a few short-term orders.
If India is able to maintain this “calm” and effectively replenish the industrial chain, build infrastructure, and train workers, it may find its place in some areas in the future.