“HonHai” of the footwear industry enters India

International Business News  –  Taiwan’s Pouchen Industries, the world’s largest shoe contract manufacturer, is set to enter India for the first time. Most of these light industry contract manufacturing enterprises were the first to enter the mainland in 1980 ~ 90, and established a low-cost production system while supporting the economic development of the mainland. Labor-intensive light industry took root earlier in the mainland and became the basis for HonHai and other electronic contract manufacturing industries to develop in the mainland…

The world’s largest shoe contract manufacturers from Taiwan have begun to enter the Indian market. They used to do most of their production on the mainland, but shifted their focus to Southeast Asia since the second half of the 2000s and are now further diversifying their production base to India, the world’s most populous country. The pace will also serve as a compass for large Taiwanese electronics companies such as HonHai Precision Industry, which is expanding its base in India.

“I hope this will be the first step towards further expansion of investment,” said Liu Hongzhi, vice president of Taiwan’s Pouchen Industries, the world’s largest shoe contract manufacturer, in mid-April when he held investment talks with the southern Indian state of Tamil Nadu. Mr Liu has shown a strong desire for the company to enter India for the first time.

Pouchen takes on the production of over 200 million pairs of shoes a year from companies such as Nike in the US and Adidas in Germany. This will be a long-term project with an investment of 23 billion rupees (approximately Rs 1.98 billion) over 12 years and will create 20,000 jobs.

It’s not just Bausch + Lomb Industries. Hong Fu Industries, the industry’s second largest company taking production orders from the likes of Nike and Germany’s Puma, decided in April to secure a factory site in Tamil Nadu. Together with Fengtai, which already produces about 30% of its footwear in India, all three large Taiwanese companies will be present in India.

“Behind the scenes” contract production as a world brand is a unique business model in Taiwan. HonHai and Pegatron, which make Apple’s iPhone, are well known, but there are also world leaders in light industries such as shoes and clothing.

Most of these companies first entered the mainland in the 1980s and 1990s in search of cheap labor. In the establishment of low-cost production system, but also support the mainland’s economic development. Labor-intensive light industry took root earlier in mainland China and became the foundation for the development of contract manufacturing in the electronics industry later.

Since the mainland’s economic development led to a significant rise in labor costs in 2008, footwear OEM manufacturers have entered Southeast Asia. In addition, the trade conflict between China and the United States has intensified this trend. Pouchen and Fengtai, which announce their production ratios by region, now produce 60 to 80 percent of their production in Vietnam and Indonesia.

The proportion of production in China, which once accounted for the majority of the two companies, is now reduced to 1-2 percent. Factories on the mainland have transformed from export bases to production bases for domestic demand.

Electronics contract manufacturers such as Hon Hai, which accounts for 70 percent of its production in China, are also moving into Southeast Asia and India. Although the decentralization of the base has just taken its first steps, the wave set off by the light industry has a history of repeating itself in the electronics industry over time.

The move of the shoe industry, which is the first to build a supply chain free from dependence on China, may reflect the future of the electronics industry.