India has a massive plan to boost manufacturing – and tech companies in Greater China will be the main beneficiaries, according to Goldman Sachs. The investment bank described the plan, known for its production-linked incentive schemes, as a “significant opportunity” for technology companies in Greater China. The initiative incentivizes foreign companies to start manufacturing in India and encourages local firms to expand production and exports there. According to Goldman, technology represents more than half of the opportunity. Goldman noted in a March report that there are six such stimulus initiatives with a total budget of more than $17 billion for the technology sector in areas such as smartphones, personal computers, servers, electronic components, semiconductors and telecommunications equipment. For example, under the IT Hardware Initiative, technology companies from Greater China account for 76% of the potential investment contribution. And under the large-scale electronics manufacturing initiative, such firms would account for 56%. The investment bank estimates that mobile phone export volume will increase six-fold between 2021 and 2025 if India follows a growth trajectory similar to that of China and a trend towards decentralized and localized production to increase supply chain security. As a leading end market with a large workforce, India became one of the main beneficiaries of this trend in 2022,” Goldman analysts wrote In addition, Hon Hai could build a new factory in India later this year, the bank said Hon Hai Precision Industry — the world’s largest contract electronics manufacturer and assembler of around 70% of iPhones — and Luxshare of China, also an Apple supplier.”[That’s] given their balance sheet capacity to expand and extended experience managing a scaled workforce, complex supply chains and logistics,” Goldman wrote. It forecasts margins and returns for the companies to be lower initially, but expects to be profitable within four years as capacity increases and supply chains are established. Government subsidies will also help, the bank said. Hon Hai’s smartphone assembly capacity expansion represents an $850 million investment opportunity in India, while Luxshare’s smartphone assembly business there is worth $92 million, according to Goldman Luxshare has a price target of 47 Chinese yuan (6.80 $), representing upside potential of around 58% Hon Hai has a price target of 135 Taiwanese dollars ($4.40), or upside potential of around 31%.
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