China and Malaysia could lose up to 20% of the $100bn global electronics repair market as major companies begin to test processes in India – with shipping demand likely to grow as a result.
New Delhi has rolled out an industry-friendly pilot programme to boost its electronics repair services outsourcing (ERSO) capabilities, targeting large manufacturers looking to shift production from China.
It will relax Customs and e-waste rules, according to local media, allowing companies to ship consumer electronics and telecoms equipment into India, where current revenue from repair services is about $350m.
India’s Ministry of Electronics and IT said had launched the ERSO pilot aiming to make India “the repair capital of the world”.
It added: “The project has been identified as a game-changer for India and has been supported by the government to make India a world leader in a hitherto untapped domain.”
According to anecdotal estimates, the global size of the ERSO industry is pegged at some $100bn, and is dominated by China and Malaysia. While China is a known sourcing behemoth, several top multinational companies, like IBM, Apple and Shell, have opted to outsource to Malaysia because of cost advantages.
With sweeping policy reforms and greater investor outreach efforts, New Delhi wants to capture some 20% of the ERSO market over the next five years.
The ministry said the trial would see intra-government departments “facilitating expeditious approvals” within a day of requests versus 10 days at present for companies seeking to repair consumer electronic devices sent in from other countries.
Under the liberalised regime, companies can also re-export imported goods to non-origin countries, an option previously forbidden.
Global investors have had concerns about India’s foreign trade policies, especially the level of import duties – a bane that saw US automaker Tesla put electric vehicle manufacturing interest in India on the back-burner.
Some five electronics majors, including Flex and Lenovo, have agreed to participate in the three-month ERSO trial, with more policy modifications to be considered, depending on industry feedback.
Leading smartphone makers Apple and Xiaomi already have a sizeable production presence in India through contract arrangements, which makes the new ERSO policy undeniably noteworthy.
On a broader view, the move is another sign that India wants to be a frontline player in the near-shoring race as trade diversification gathers steam. The latest report by Morgan Stanley has highlighted India’s long-term growth potential on the back of large-scale reforms over the past decade.
“We expect a major rise in investments, a moderation in the CAD [current account deficit] and an increase in credit to GDP to support the coming profit growth,” said the US-based financial services leader.
At the same time, however, New Delhi remains increasingly concerned about China’s growing maritime influence in the Indian Ocean. State-owned China Merchants Port Holdings (CMPH) has made further inroads into debt-stricken Sri Lanka, with a $392m investment at Colombo Port, touted as South Asia’s largest logistics hub and targeted for completion in 2025.
The move complements the 85% stake CMPH holds in Colombo’s premier box terminal, CICT, and similar interests in Hambantota Port under a 99-year lease deal. In addition, Gwadar Port in Pakistan is operated by China Overseas Port Holding Co.
Sensing regional interest risks, New Delhi is trying to catch up, albeit belatedly, on the supply chain side in the sub-continent. Adani Group – India’s port network leader – recently won rights to build and operate the West Container Terminal at Colombo, while a government-to-government co-operation framework is taking shape to identify and develop infrastructure projects, mainly covering shipping and logistics verticals, in Trincomalee, 300 nautical miles from Colombo.
Tricomalee is currently a small commercial harbour, but presents significant growth potential because of the site’s deep water. Ironically, though, New Delhi wants to tame Colombo’s transhipment growth by building “hub” projects along the country’s east coast, part of a larger effort to cut export/import logistics costs.
