Business

Why India is losing out to Vietnam in attracting companies quitting China

Published

4 years ago

2022/10/16

BY S VENKAT NARAYAN
Our Special Correspondent

NEW DELHI, October 15: In 2020, Chinese auto and electronics major BYD, Apple’s largest contract manufacturer of iPads, was looking to shift some of its capacity from China to India. But the move was shelved after geopolitical tensions erupted between the two countries, and India introduced stiff foreign direct investment (FDI) rules for Chinese companies.Now, two years on, BYD has just started rolling out iPads from Vietnam. It has invested $268 million to set up a new factory with a capacity to churn out 4.33 million tablets a year.

Vietnam’s gain is India’s loss. The two Asian countries have been aggressively wooing global companies and their suppliers to shift from China. Growing US-China geopolitical tensions and supply chain disruptions due to sudden closures of factories to combat Covid-19 have impelled many tech players to explore other investment destinations.

India has grabbed one jewel in the crown — Apple Inc. Its vendor Foxconn recently started assembling the latest iPhone 14 within a few days of its global launch. And if everything goes according to script under the production-linked incentive (PLI) scheme, India will account for 12 per cent of the global production value of iPhones, which could go up to 20 per cent by FY26.

The PLI scheme, meant primarily to reduce the cost disadvantage between India and Vietnam for making mobiles, offers an incentive of 4-6 per cent on the production value for five years. But sources in the know clarify that Apple Inc is not shifting manufacture of its AirPods to India.All in all, though, Vietnam is way ahead in the game. Apart from grabbing iPads, The New York Times reported that Google is also shifting the assembly of its latest Pixel 7 mobile phones to Vietnam from China. Reports had said India was also in the reckoning.

Hanoi has also bagged Chinese mobile player Xiaomi, which is contract-manufacturing phones with Chinese DBG in Vietnam for exports to Thailand and Malaysia. Microsoft is manufacturing Xbox consoles there. In the non-electronics space, toy maker Lego, which was scouting for a factory to cater to growing Asian demand (it has a factory in China), opted for Vietnam recently where it has committed an investment of $1 billion.

Vietnam’s crowning glory has been Samsung. Since 2008, the Korean chaebol has invested a staggering $19 billion in the country shifting mobile capacity from China. It recently announced an additional $3.3 billion for semiconductors. As much as 50 per cent of its phones are made in Vietnam and 2021 annual exports were $65.5 billion (three times what Apple promised to manufacture in India in FY26).The new battleground for the two countries is in PCs, laptops and tablets as global brands look to hedge against their over-dependence on China: 75 per cent of all laptops are made in that country.

Vietnam’s share in this space might be just 2 per cent (contract-manufacturing for Dell, Amazon and Google, say reports) but it is furiously licensing contract manufacturers to create capacity and become a hub for the world here, too.To this end, Hanoi has signed an agreement with Foxconn recently to invest $300 million to assemble laptops and tablets, and has given permission to Wistron last year to make computers and peripherals. Nikkei reports that Microsoft might start producing its Surface line, including notebooks and desktops computers.

India’s answer to woo laptop (the bulk of which are imported from China), PC and tablet makers has been through a Production-Linked Incentive (PLI) scheme for IT products, which has failed to take off. Only around four of the 14 eligible players, domestic and global, have succeeded in meeting their production targets, and they say incentives (an average of 2 per cent) are too low and only for four years.

The electronics ministry is now reworking the plan to cater better to the requirements of global players, who have shown interest in shifting capacity from China if the incentives are attractive enough.Yet the big challenge that India faces — which Vietnam does not — is in setting up a supply chain, which both in mobile and IT products is dominated by Chinese manufacturers. But India’s Foreign Direct Investment (FDI) policy has effectively barred them through the automatic approval route, meaning Chinese investment proposals require government scrutiny. Even then, few have been granted permission over the past two years.

For instance, 10 per cent of Apple’s top 200 vendors are based in Vietnam but the bulk of them are from China. In India, Apple has around 12 global suppliers but only three of them are Chinese firms who entered before the FDI restrictions were imposed. As companies like Apple take a big jump in production from this year, higher value addition is possible only if their Chinese vendors are allowed in. India wants value addition upped from 15-20 per cent to 35 per cent in the next four years. Hanoi imposes no such restrictions; locational proximity enhances its attractiveness.

Vietnam has two other key advantages — far lower input tariffs than India, and the ability to leverage its plethora of free trade agreements (FTAs) that allow zero duty entry for exports.A preliminary study being undertaken by global companies points out that average most favoured nation tariffs for mobile phones and its supply chain and selected electronics products for 122 products is at around 9.9 per cent in India compared to 5.7 per cent in Vietnam.

The other problem, say companies, is that unlike Vietnam there is constant fear of differing interpretations and wrong classifications, with the revenue department suddenly raising demands or even accusing global players of round tripping. “There is no pre-consultation and advance authorisation like in Vietnam. Once demands have been made, the only way out is litigation,” said a senior executive of a global electronics company.

Critically, Vietnam has also leveraged its FTAs with over 56 economies that have helped suppress tariff barriers and make it a potential supply chain strategic hub. For instance, its recent FTA with the European Union has lifted tariffs on 85 per cent of Vietnamese goods. India, meanwhile, has abstained from the most consequential of FTAs — the Regional Comprehensive Economic Partnership (RCEP).

Of course, India has the advantage of an abundance of skilled labour available at still lower wages. Vietnam’s wage for workers is half of that of China, where rising wages have become a barrier to investment. But India’s worker wages are still a third of that of China, says an executive of a contract manufacturing company. That apart, Vietnam’s much smaller population has a limited number of skilled workers.But most global players say that this one advantage is not enough. Vietnam has much more flexible labour laws that partly neutralise the advantage. Clearly, India will need much more than cheap labour to leverage global corporations’ China Plus-One strategy.

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Business

Cross-border supply chains seen as key to new business opportunities

Published

14 hours ago

2026/09/22

Sahan Weerasooriya

Dignitaries at the launching of the new dhal processing factory.

By Ifham Nizam

Australian High Commissioner to Sri Lanka Matthew Duckworth described Omega Traders’ latest investment in a modern dhal-processing facility as a strong example of how cross-border supply chains can translate into productive investment, local value addition and new business opportunities in Sri Lanka.

The investment, which adds a 150-metric-tonne-per-eight-hour-day processing capacity to Omega Traders’ operations, marks a significant expansion of the company’s manufacturing footprint as it celebrates 45 years in Sri Lanka’s food commodity industry.

Speaking at the inauguration of the new Lentil and Orid Dhal Processing Factory in Wattala, last Friday, H.C. Duckworth said the facility represented more than an increase in production capacity, pointing to the wider economic value created when Australian agricultural production is connected with Sri Lankan processing and distribution.

‘This facility is not operating on its own. It is part of a long supply chain and a trade partnership between Sri Lanka and Australia, Duckworth said.

His comments placed the Omega Traders’ investment within a broader commercial context: Australia brings agricultural production and established export capabilities, while Sri Lanka provides processing capacity, labour, market access and opportunities for further value addition.

The investment comes as Sri Lanka continues to look towards greater domestic processing and value-added manufacturing rather than relying solely on the import and distribution of finished commodities.

Dr. (Mrs.) Siddhika G. Senaratne, Director General/CEO of the Sri Lanka Standards Institution (SLSI), who attended the inauguration as Guest of Honour, highlighted the importance of quality assurance in food processing and the role of standards in maintaining confidence across the supply chain.

The facility is equipped with new-generation cleaning, processing, sorting and quality-control machinery, including advanced colour-sorting technology, automated systems and an in-house quality-control laboratory.

The additional capacity will support Omega Traders’ three principal Mysoor Dhal brands — Rainbow Jumbo Dhal, Komas Dhal and Rozanna Dhal — which serve different segments of the Sri Lankan market.

But the investment also has a distinctly local agricultural dimension.

Through its Orid Dhal operation, Omega Traders plans to source locally grown black matpe from Sri Lankan farmers and process it at the new facility.

That creates a domestic value chain linking farmers to industrial processing and consumers, while potentially increasing demand for locally produced agricultural commodities.

Duckworth said this type of business partnership could generate benefits for both countries.

‘Australia produces some of the world’s best agricultural products and we are very efficient and very capable at trading them. But that alone is not going to bring success to Australia. Just as building a factory like this is not going to bring success to Sri Lanka, he said.

‘It’s when we bring these entities together that our products produced in Australia can be processed in excellence here in Sri Lanka that enables this to be a success, the H.C. explained.

The investment therefore combines two complementary supply streams: imported agricultural commodities, including Australian-origin products, and locally produced black matpe for the Orid Dhal operation.

For Sri Lanka, the business significance extends beyond Omega Traders itself. Increased processing capacity creates demand for logistics, packaging, distribution, services and agricultural inputs, while supporting employment within the food-processing ecosystem.

Business

Ideal Motors makes history with multiple workplace excellence accolades

Published

14 hours ago

2026/09/22

Sahan Weerasooriya

Representatives from Ideal Motors (Pvt) Ltd receive top organizational culture and workplace accolades at the Great Place to Work® 2026 awards ceremony.

HR-led transformation places people, culture and business performance at the heart of the organisation

Ideal Motors (Pvt) Ltd,has achieved a significant milestone by securing multiple prestigious workplace and organisational culture accolades in 2026, reinforcing its position as an employer of choice in Sri Lanka’s automotive sector.

Among its latest achievements, Ideal Motors has been recognised as one of the 20 Great Workplaces for Young Talent in Sri Lanka 2026, ranked No. 1 and awarded the Gold Medal in the Small and Medium category of Best Workplaces™ in Sri Lanka 2026, and ranked No. 18 among Best Workplaces™ in Asia in the Medium Scale category—the highest-ranked Sri Lankan organisation in the category. The company also received Industry Excellence for Workplace Culture – Trading Industry.

The Young Talent recognition was presented at the Great Place To Work® CXO Forum 2026 held on 10 September 2026 at Cinnamon Life, Colombo. The recognition followed an evaluation of more than 100 certified organisations and highlights workplaces that create meaningful opportunities for employees under 35 to develop, contribute and grow.

At the Best Workplaces™ in Sri Lanka Awards Gala 2026, held on 11 September 2026 at Cinnamon Life, Colombo, Ideal Motors achieved another historic milestone by entering the Best Workplaces Sri Lanka list for the first time and securing the No. 1 Gold Medal in the Small and Medium category. The company also achieved No. 18 in Best Workplaces™ in Asia, reflecting the strength of its workplace culture beyond Sri Lanka.

These achievements represent more than a collection of awards. They reflect the transformation taking place within Ideal Motors, where people, culture and business performance are increasingly viewed as interconnected drivers of sustainable growth.

Over the past few years, the organisation’s HR function has evolved from a predominantly administrative role into a strategic business partner, with greater emphasis on employee experience, capability development, engagement, performance, communication, wellbeing, diversity and inclusion, and data-driven HR practices.

Business

AAC takes seat belt safety message to Colombo motorists

Published

14 hours ago

2026/09/22

Sahan Weerasooriya

AAC staff distribute seat belt safety material to motorists on Galle Face Centre Road, Colombo.

The Automobile Association of Ceylon (AAC) conducted a seat belt safety awareness programme in front of its headquarters and along Galle Face Centre Road, encouraging motorists and passengers to make seat belt use a habit on every journey.

AAC staff, working alongside officers of the Sri Lanka Police Traffic Division, distributed specially designed hanging tags and stickers to drivers. The material carries a clear reminder that seat belts protect drivers as well as passengers in both the front and rear seats.

The public awareness drive was held ahead of the requirement taking effect on 20 September 2026, under which seat belt use becomes mandatory for every occupant of a vehicle travelling on an expressway.

AAC emphasized that the regulation should be understood as a life-saving measure rather than only a legal obligation. Wearing a seat belt can help prevent occupants from being thrown inside or from a vehicle during a collision and can lessen the severity of injuries.

The Association said road safety legislation must be supported by sustained public education, visible enforcement and responsible behaviour by all road users. The participation of the Traffic Police helped the campaign reach motorists directly in a busy part of central Colombo.