South India set to become global manufacturing hub amid US-China trade tensions
The trade war between the US and China is likely to push South India, particularly Tamil Nadu, to become the world's manufacturing hub, according to Krungthep Turakij.
In particular, following President Donald Trump’s announcement of import tariffs, global manufacturers are re-evaluating their supply chains.
According to Morgan Stanley Research, India’s working-age population (15-64 years) stands at 961 million, the second-largest in the world, just behind China, which has 984 million. However, India’s manufacturing wage is only US$1 per hour, compared to China’s $5.6 per hour.
This advantage has led companies like Delta Electronics, where Benjamin Lin serves as the chairman for India, to report in an exclusive interview with Bloomberg that the supply chain in India is now more cost-effective than factories in Thailand, although it still cannot compete with China on price.
Supportive policies and infrastructure
Local governments in South India are competing to attract investment, particularly Tamil Nadu. TRB Rajaa, the state's industries minister, emphasised, “Everything we do here is tailored to the investors’ needs.”
For instance, Delta Electronics has enjoyed various incentives, including a 10-year corporate tax exemption and quick access to utilities such as electricity and water, along with robust infrastructure like road networks and ports.
Bloomberg’s analysis reveals that Tamil Nadu already boasts a strong manufacturing base, with the highest share of factories in India at 15.7%, despite representing just 6% of the country’s population.
The state accounts for more than 40% of India’s electronics manufacturing and exports, as well as nearly half of the country’s automotive and component production.
Supply chain shifts in response to US trade policies
Uncertainty surrounding US trade policies is pushing foreign companies to explore new options. Lin from Delta Electronics explains, “We follow the customer,” adding, “If the customer asks to move out of China, we move out of China.” Companies like Apple have already announced plans to source the majority of their smartphones from India.
This shift presents an opportunity for domestic parts manufacturers and contract producers. Hosur, an industrial city in Tamil Nadu, has become a hub for the manufacturing industry, with the world’s largest electric scooter factory, Ola Electric, and Tata Electronics, which is building a factory to produce iPhones.
Challenges and limitations
Despite progress, South India still faces significant challenges, particularly its reliance on imported components and raw materials from China.
Swapnil Jain, co-founder of Indian motorcycle company Ather Energy, acknowledged, “Still being dependent on China for a large part of the supply chain is something we have to actively mitigate,” particularly with crucial parts like microcontrollers and magnets for batteries, which have become contentious in the US-China trade war.
