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India ready to replace China as world's workshop, but hurdles remain

Published: 24 Apr. 2025, 07:00

LG Group Chairman Koo Kwang-mo, second from left in the front row, visits LG Electronics' Noida manufacturing plant in New Delhi, India, to observe the air conditioner production process in this photo provided on March 4. [LG]

With the world’s largest population and rapidly growing economy amid the escalating U.S.-China tariff war, India is poised to reap substantial benefits as a manufacturing alternative to China — if it can overcome its infrastructure and regulatory hurdles.

As The Wall Street Journal put it, the Asian country has a “golden opportunity to capture U.S. business from China.”

Tech and auto giants bet big on India

Apple shipped approximately $2 billion worth of iPhones from its Indian suppliers, including Foxconn and Tata Electronics, to the United States in March alone, making it the highest monthly export volume on record. The company relies on China for 80 percent of its iPhone production, but amid rising tensions and reciprocal tariffs between Washington and Beijing, Apple chartered cargo planes to ensure stable inventory levels in the United States.

The Financial Times projected that Apple aims to manufacture 25 percent of its iPhones in India by 2027. U.S. chipmaker Micron is constructing a semiconductor packaging facility in Gujarat, underscoring growing interest in India’s potential as a tech manufacturing hub.

Korean companies are also expanding operations. LG Electronics, which is preparing to take its Indian subsidiary public later this year, plans to build a third factory in Sri City, adding to existing facilities in Noida and Pune.

LG Group Chairman Koo Kwang-mo visited India for his first overseas trip of 2025, stating, “The next few years will be critical in figuring out how to differentiate ourselves from competitors in this market.”

Hyundai Motor listed its Indian unit on the local stock exchange in October last year, signaling its long-term commitment to the country.

Indian markets outperform amid global downturn

India’s growing appeal as a manufacturing base has already impacted its stock markets. The Sensex, a benchmark index of the Bombay Stock Exchange, rose 5.91 percent over the past month as of April 17, while the broader Nifty 50 climbed 5.97 percent.

In contrast, major global indexes declined during the same period. The Nasdaq composite fell 8.55 percent, the Kospi dropped 4.4 percent, the Nikkei tumbled 7.66 percent, and Hong Kong’s Hang Seng and China’s SSE Composite dipped 11.39 and 4.26 percent, respectively.

“India is increasingly seen as a beneficiary of supply chain realignments stemming from U.S.-China tensions,” said Baek Kwan-yeol, a researcher at LS Securities. “It’s stepping into the role China once played as the world’s factory.”

Hyundai Motor Group Executive Chair Euisun Chung, right, and NSE CEO Ashish Chauhan pose for a photo in Mumbai, India on Oct. 22, 2024, the day of the Korean automaker's subsidiary 's listing on the Indian stock market. [HYUNDAI MOTOR]

India’s long-term economic outlook remains robust. The International Monetary Fund forecasts that by 2027, India will surpass Germany and Japan to become the world’s third-largest economy. The Asian Development Bank projects India’s GDP growth to reach 6.7 percent this year and 6.8 percent in 2026.

The country’s trade volume has soared, climbing from $640 billion in 2020 to $1.14 trillion last year, marking a 77.9 percent increase. By comparison, trade volume growth over the same period was slower in China with 32.4 percent, Korea with 34.2 percent and the United States with 41.6 percent.

Infrastructure and labor remain key obstacles

Despite its progress, India’s manufacturing sector continues to face challenges. According to a 2025 strategy report by the Korea Trade-Investment Promotion Agency, frequent power outages and water quality issues have led to production delays, especially for precision components.

“Power cuts are frequent enough that we rely on generators, but during winter, air pollution restrictions often prohibit diesel generator use,” said a worker at an electronics firm operating in India.

India also grapples with labor unrest and a shortage of highly skilled workers.

“The Modi administration is serious about building manufacturing clusters and pushing digitization,” said Jang Sang-sik, head of the Korea International Trade Association’s trade research institute.

“But excessive regulations, a rigid labor market and poor logistics infrastructure still hold back India’s potential. Whether India can replace China will depend on how decisively the government tackles these issues and attracts foreign companies,” Jang said.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY NA SANG-HYEON [[email protected]]