Apple's 'China Plus One' key driver of Tamil Nadu's electronic export boom

Probably the first time in history or the first time after the golden period of electronic exports in the state during the prime period of Nokia, Tamil Nadu has become the top electronic goods exporting state in India surpassing Uttar Pradesh and Karnataka in 2022-23. One major reason according to industry experts is the ‘China Plus One’ strategy of global majors like Apple, following which its contractors like Foxconn and Pegatron and suppliers like Salcomp have added to the rise of Tamil Nadu as the country’s electronic hub last year.

Tamil Nadu posted almost a two-fold increase in electronic exports from $1.86 billion in 2021-22 to $5.37 billion in 2022-23. Interestingly, the state was the No. 3 exporter of electronics, after Karnataka ($3.87 billion), Uttar Pradesh (3.77 billion) and Maharashtra (42.08 billion) in 2021-22. State-wise data of exports is available only from 2017-18.

 “We don’t have any company specific data. This is for the first time Tamil Nadu is becoming the number one state, after the Centre started publishing data online. The major contributors to this growth are telecom and network equipment and computer hardware,” said V Vishnu, managing director (MD) and chief executive officer, Guidance Tamil Nadu — the state’s investment promotion agency.  The electronics sector is likely to play a major role in achieving the $1 trillion economy target set by chief minister M K Stalin. Tamil Nadu has seen investments worth Rs 2.6 trillion by signing 227 MoUs since May 2021 when the new DMK government took charge.

An industry source told Business Standard that the only other period in which the state’s electronic exports were on an upward curve was during the golden days of Nokia – after 2005. At one point, Nokia’s Sriperumbudur factory was the world's largest mobile phone plant, having 8,000 employees working in three shifts and producing more than 15 million phones a month, exporting to over 110 countries. According to reports, it even exported phones worth more than $2 billion a year, during one of its peak years.

 “During, Nokia’s time, they were only manufacturing feature phones, not in a higher price range. Hence, the volumes will naturally be high. However, in Apple’s case, since premium phones are being manufactured, value will be higher,” said an industry official, in terms of anonymity.  In 2021-22, the total export value of electronic goods in India was $23.57 billion, up 51 per cent from 15.59 billion in 2021-22. During the first two months of 2023-24 also, Tamil Nadu continued its top position by exporting around $1.56 billion worth of electronic goods, as compared to $661 million by Karnataka and $636 million by Uttar Pradesh.

In 2022, JP Morgan had said that Apple, to diversify production, is considering making 25 per cent of its handsets in India by 2025 and shifting 5 per cent of global production of the iPhone 14 to India by the end of 2022.

Following this, the world's largest electronics maker Foxconn, best known for making Apple’s iPhones, had announced it will put $500 million in its India unit to expand production. Following this, there were reports that it may increase staff strength from around 15,000 to 18,000. Last September, Taiwan’s Pegatron became the third Apple vendor (after Foxconn and Wistron) to set up a manufacturing unit in India by inaugurating a unit at Mahindra World City in Chennai and investing around Rs 1,100 crore in the unit, potentially generating around 14,000 jobs. This March, Salcomp, the world’s largest producer of mobile phone chargers, and a key supplier to Apple Inc had also announced around Rs 1,800 crore investment plans in its Tamil Nadu unit.

Out of Apple’s 12 suppliers in India, five are in Tamil Nadu -- Flex, Hon Hai Precision Industry Company, Lingyi iTech, Pegatron Corporation, Taiwan Surface Mounting Technology and Zhen Ding Technology Holding. 

Electronic Goods Exports-State-wise data
			$/million
MARCHING AHEAD
	2020-21	2021-22	2022-23
Tamil Nadu	1,664	1,865	5,371
Uttar Pradesh	2,842	3,775	4,904
Karnataka	2,267	3,874	4,522
Maharashtra	1,631	2,084	2,683
Gujarat	599	897	2,334
Total (India) ($/bn)	11.09	15.59	23.57