(Yicai Global) April 2 -- China Star Optoelectronics Technology wants its upstream suppliers to enter India after the liquid crystal display maker, China's second largest, began investing in the world's second-most populous country.
"Now is a good time for Chinese companies to invest in India," Zhao Jun, senior vice president of Shenzhen-based China Star, told Yicai Global. "India's industrial development is about to hit a turning point."
China Star was the first screenmaker to enter India, Zhao said, adding that several Korean and Taiwanese firms also intend to. "It's risky for us to move to India two years before them, but I'm afraid many companies will already be there if we wait two years.
"Right now it's 'made in China, delivered by China,' but it's going to become 'made in India, delivered by India,'" he added.
China is becoming one of the largest sources of direct investment in India, which is the world's third-largest color television market, second-biggest mobile phone maker and home to the planet's second-largest mobile phone sector.
Unlike when it previously invested in India, China Star is no longer concerned with just sales. It wants to drive output across the entire supply chain.
The Indian Consulate-General in Guangzhou and investment experts from Invest India met with dozens of the company's upstream suppliers in Shenzhen on March 28 as China Star looked to cement its status as an intermediary between manufacturers and the Indian government.
The firm's parent TCL laid the foundations for an industrial park in Andhra, Pradesh state, in December, which will contain several facilities including a China Star solar module project and TCL's own finishing machine plant. The park also has land reserved for upstream suppliers so they will not need to buy land if they move to India.
"We are ready for construction and will get a land permit soon, and then work will begin," Zhao said. His firm held an investment briefing session for suppliers who may move to the park, and many are keen to learn about the opportunities, challenges and risks, he added. "They all have enthusiasm, but they know nothing about India."
China Star's own move to India was a bold adventure, investing in the country's first LCD factory to provide key components for India's phone and TV makers. It was also the company's first overseas investment and could make or break its plans to go global.
That is part of the reason the company wants its suppliers to move there, to reduce costs and improve competitiveness, Zhao said. "We hope high-value spare parts, such as backlights, can be made in India so raw material costs will not increase substantially, even if the Indian government raises import tariffs on parts and components in the future.
"Local production of raw materials can also reduce China Star's logistics costs and improve efficiency," he continued, adding that the company hopes to build low-cost, high-profit package products by working with suppliers. The firm has already proposed several major product categories and hopes one or two suppliers from each will move to India.
Completing the Chain
"As the main business entity of the Indian industrial park, TCL will dominate land acquisition, factory building, leasing services and public service facility construction," TCL Vice President and China Star Senior VP Jin Song told Yicai Global, saying this should calm upstream suppliers' worries.
"TCL will also serve as a contact window to the Indian government for supporting policies, to help suppliers resolve issues they may have investing in India," he added.
"India is a mysterious and vibrant country. Foreigners working and living there will inevitably encounter many problems -- transport, living quarters and water. The manager of the industrial park will need to fix these problems for everyone, as upstream suppliers are going to encounter more problems in India than TCL," Jin said, adding that cooperation between up- and downstream manufacturers will better highlight the respective advantages of each.
"China Star's big brand customers are also urgently demanding the company move to India, and have been meeting with us every week to discuss progress," Zhao said.
Samsung, Oppo and Vivo have all opened their own mobile phone factories in India, while Huawei and Xiaomi rely on original equipment manufacturers in the country. Transsion Holdings, the Chinese phonemaker that dominates Africa, is also considering an Indian plant. All are concerned about China Star's move, he added.
The first phase of China Star's plans is to complete equipment installation and begin trial production in December, with mass production beginning early next year. The facility will be able to produce 8 million 22 inch to 55 inch modules for televisions and 30 million 3.5 inch to 8 inch smartphone modules each year, with excepted annual turnover of CNY6 billion (USD894 million).
The company has already recruited more than 110 college graduates in India and plans to train them as engineers, Jiang Youdong, general manager of China Star's India project, told Yicai Global.