Arvind's Newsletter

1.Foxconn’s China Plus one strategy as reported by Financial Times 

In recent months the group has broken ground for a factory near Hyderabad , the capital of Telangana state, that government officials said would make smart headphones, and it has acquired land near the airport in the Karnataka capital Bengaluru for an iPhone plant. Another site near Hyderabad and two more in Karnataka are in the planning stage, according to an internal Foxconn presentation reviewed by the Financial Times.

Multinationals’ desire for a “China plus one” strategy, following supply chain disruptions and geopolitical tensions between Washington and Beijing, is driving Foxconn into a renewed push into India, where it first invested 15 years ago but where it still only employs some 50,000 of its 1mn global workforce.

Foxconn’s Chair Liu also told investors that the company expected to invest “several billion dollars” in India and to start making key components for consumer electronics and some electric vehicle components next year in Karnataka, Telangana and Tamil Nadu, its largest existing iPhone assembly hub.

India now accounts for $10bn of Foxconn’s annual revenue. That is 4.6 per cent of the company’s $216bn 2022 revenue, more than double the 2 per cent registered in 2021.

Still, the push into India is also revealing limits to Foxconn’s willingness and ability to diversify. Foxconn executives and other observers dismiss the expectation that India could come even close to matching China’s role as a global technology manufacturing hub.

Liu has said China accounts for 75 per cent of Foxconn’s global operations, up from 70 per cent before the pandemic. He has not given a target for a more distributed footprint, reflecting a decidedly cautious attitude towards India.

According to Foxconn’s internal presentation, it currently has nine campuses in India with 36 factories. Its operations are mainly concentrated in Tamil Nadu and Andhra Pradesh, producing smartphones, feature phones — mobile phones with fewer functions than smartphones — television sets and set-top boxes for customers including Sony, Xiaomi and Apple.

2.Income Tax Returns files vs Income Tax payers: while IT returns are increasing the Income Tax payers is decreasing.

The number of people filing income tax returns rose to 74 million in FY23, compared with 64.7 million in FY20. But only 30% or 22.3 million of those who filed returns in FY23 actually paid any tax, compared with 35.7 million Indians in 2020. That means the number of income taxpayers who paid any money to the government actually declined by nearly 40%.

Direct tax collections in FY23 grew by over 17% to ₹16.61 lakh crore (~$200 billion). They have risen by another 17% this year so far compared with the same period last year as reported earlier this week. That means fewer people are paying more tax.

3.The economic losers in the new era of aggressive industrial policy according to Wall Street Journal

The world’s biggest economies are offering huge subsidies to draw green technology industries to their countries, upending a global economic integration that for decades broke down barriers to trade and investment between countries. Some small players are getting left behind. Industrialised nations such as the U.K. and Singapore lack the scale to compete against the biggest economic blocs in offering subsidies. Emerging markets such as Indonesia, which had hoped to use its natural resources to climb the economic ladder, are also threatened by the shift.

4.The clean energy transition is happening faster than you might think reports the New York Times.Renewables are now expected to overtake coal as the world’s largest source of electricity by 2025.

China is the world’s biggest polluter. It has the second-largest population on earth, with a growing economy that increasingly demands energy. If China largely fills that demand with coal and other fossil fuels, as it has for the past two decades, it could negate the rest of the world’s progress in reducing planet-warming greenhouse gas emissions

The good news is that China is not relying only on fossil fuels. The world is moving toward a clean energy future faster than experts expected. And that future includes China. It already produces more electricity by solar and wind power than any other country. China is also a leading manufacturer of electric cars. They now make up a larger share of the passenger vehicle market in China than in the U.S. or the E.U.

China has poured a lot of money into the research, development and use of clean energy, using its extensive manufacturing base to build solar panels and wind turbines and bring down prices worldwide. It has provided subsidies to buyers of electric vehicles, as the U.S. now does. And it has pursued, and surpassed, aggressive goals: China vowed to double its capacity of wind and solar power by 2030. It is on track to meet that goal five years ahead of schedule.

Still, there is some bad news. While China is the world’s biggest adopter of clean energy, it also remains the world’s biggest user of fossil fuels, particularly coal.

This may not be a contradiction so much as a transition. China’s investments suggest it is enthusiastic about clean energy. But it needs to power homes and factories at levels that clean energy sources alone can’t handle yet. So China continues using fossil fuels to meet its needs. As clean energy becomes cheaper and more competitive, China could replace fossil fuels and over time reduce how much it pollutes.

5.The fast-rising weight of American cars is hampering efforts to make them more energy efficient and eroding road safety, reported Bloomberg.

The average weight of a new vehicle sold in the U.S. last year was more than 1,000 pounds (450 kilograms) higher than in 1980, and up 175 pounds compared to 2019, driven in part by growing safety regulations but also by consumer preferences for larger vehicles. “It’s not good for the environment, it’s not good for resources, it’s not good for efficiency,” said the chief technology officer at Stellantis, the carmaker which includes the Jeep and Chrysler brands, arguing that cutting vehicle weight was his biggest engineering challenge.