Apple’s largest iPhone assembler Foxconn’s move to recall hundreds of Chinese engineers and technicians from its iPhone factories in India is unfortunate. The Foxconn move is the latest example of how China is determined to curb technology transfers and exports of equipment to India and other South-east Asian nations as it seeks to protect its manufacturing base and prevent other countries from growing theirs. Whether this is a breach of contractual agreements will be sorted out later, but in the meanwhile, the setback to Apple, which has been scaling up exports of phones from India, and was readying to ramp up production of the iPhone17, is undeniable. Both the quality of production and the efficiency of the assembly lines would be impacted. Nearly all the iPhones exported by Foxconn from India went to the US between March and May, customs data showed, far above the 2024 average of 50%.
The episode, once again, exposes India’s big weakness in its inability to create a large pool of adequately trained manpower that can be employed in the country’s high-tech manufacturing units. The problem is not a new one. Corporate India has been highlighting this concern for quite some time saying that while there may be enough workers, employability remains an issue. Mercer-Mettl’s second report on India’s Graduate Skill Index shows employability fell from 44.3% in 2023 to 42.6% in 2024. The latest India Skills Report found that about 64% of engineering graduates are employable while a TeamLease showed that only 45% of the 1.5 million engineers that graduate every year can do what industry requires. Indeed, the lack of adequately skilled manpower is becoming a serious impediment to growing the manufacturing sector and taking its share of the economy to 25% from 17% currently, one of the stated aims of this government.
It’s evident now that not enough attention is being paid to this problem even though studies by the National Skill Development Corporation reveal a huge supply-demand gap. By one estimate, the demand for skilled workers is around 103 million whereas the supply is just about 74 million. According to a report by consulting firm Knight Frank, over 80% of the workforce in the construction sector, which is the country’s second largest employment generating sector, is unskilled. While India has been importing workers from China for high-end jobs, companies are unable to recruit workers even for basic jobs.
While attempts at increasing the pool of skilled workers have been made, they are clearly not ambitious enough to address the imbalance. Only 5% of India’s workforce has received formal skill training as against 80% and 96% in countries like Japan and South Korea. Unless this is addressed soon, India’s ambitions of becoming an important link in the global supply chain will remain on paper. In this context, the first round of the National Apprenticeship Promotion Scheme (NAPS) has met with lukewarm response. One is not sure how corporate India will respond to the fresh proposal for a 30% increase in the stipends for both NAPS and the National Apprenticeship Training Scheme. It’s time for the corporate sector to invest in skill development. In return the government must ease labour laws to ensure that wages don’t spiral out of control and that companies can hire and fire at will. Else, India Inc will only resort to greater automation and we will see more “lights out” manufacturing units.