Let’s not again unmake in India

Over 1,000 workers at Samsung’s Sriperumbudur factory in Tamil Nadu have been on strike since Sep 9 over demands for trade union recognition, better wages, and improved working conditions. The Centre of Indian Trade Unions (CITU), affiliated with CPM, leads the strike.The strike has halted 80% of the factory’s production of TVs, refrigerators, and washing machines, affecting local sales and exports.If swift action isn’t taken, the unrest could spread to hundreds of other firms in the region, as CITU is also talking to firms such as Foxconn, Flex, and Sanmina to recognise its union and agree to other terms.Making in India | This strike comes at a crucial time when India is poised to triple its electronics sector turnover to $500bn by 2030. Both Samsung and Sriperumbudur are an important part of India’s electronics story.Samsung has moved much of its production from China to Vietnam and India. The MNC contributes 30% or $55.7bn to Vietnam’s exports, and has ambitious plans to expand operations in India.Sriperumbudur, 40km from Chennai, is a hot new industrial hub, with many SEZs and billions of dollars of investments. It houses global manufacturing giants such as Hyundai, BMW, Dell, Flextronics, Foxconn, Jabil, Lenovo, Mitsubishi, Nissan, Saint-Gobain, and Samsung.Breaking up in India | Sriperumbudur also has a history of many labour unrests, with significant strikes at Hyundai (1999, 2007, 2011), Nokia (2014), Foxconn (2015, 2021), and Royal Enfield (2018).Foreign competitors often gain from disruptions such as the Samsung strike. A similar situation led to Nokia’s shutdown in 2014, causing India to lose its competitive edge in mobile manufacturing for over a decade. It is crucial to recall this event to avoid repeating the same mistakes.How we lost Nokia | Nokia moved to Sriperumbudur with seven component suppliers in 2006-07 and soon became a symbol of success in mobile phone manufacturing. Between 2010 and 2013, Nokia employed over 7,000 direct workers and 10,000 indirect workers and exported over $2bn annually.However, local political interference soon began, with demands for contracts and free phones. The situation escalated when the state sales tax department accused Nokia of evading ₹2,400cr in taxes by falsely reporting domestic sales as exports. State govt refused to accept Nokia’s views, despite Nokia providing customs documents to prove the mobile phones were indeed exported. Madras HC provided relief only after a prolonged legal battle. New tax disputes and union pressures further crippled Nokia’s operations, leading to the plant’s eventual closure.Nokia’s collapse reduced India’s mobile phone exports from $2bn to just $200mn the following year. Over 17,000 workers, 70% of them women, lost their jobs. India’s mobile phone imports from China surged. Nokia’s downfall tarnished India’s reputation as an investment destination, giving China the advantage.Fear of disruption | The Samsung strike raises concerns about India’s ability to provide a trouble-free, uninterrupted manufacturing environment. This is essential to attract investors and MNCs. The strike has the potential to disrupt the regional manufacturing ecosystem. Prolonged unrest could motivate unions to push their agenda in other states.The timing is particularly sensitive, as India is currently reviewing Free Trade Agreements with South Korea and Asean, aiming to boost investments. Labour instability can discourage future foreign investment.Actions by govt | TN govt should immediately bring together Samsung and other major manufacturers to negotiate and prevent the unrest from spreading.It may involve unions in industry-wide discussions on wages, safety, and worker welfare without allowing unions to interfere with individual company operations. Tough, but required.Samsung should create an internal worker representation committee to address wage concerns and other key issues for experienced workers. It should be more accommodative to genuine demands.Centre should collaborate with states to proactively resolve labour disputes affecting large firms and prevent issues from escalating into large-scale strikes. The Centre can establish industrial intelligence units to monitor and address potential threats to industry to avoid a recurrence of Nokia and Samsung-like situations.Clarity for producers | Most important, GOI needs to establish a clear legal framework that defines manufacturers’ obligations, including compliance with labour laws, ESG standards, and worker welfare. If companies like Samsung comply with these requirements, the state should act quickly to protect them from disruptions.This law should define rules regarding trade unions’ involvement or their representation on management boards to ensure transparency and predictability for investors.What did China do | The unrest at Samsung is a critical reminder for both state govts and the Centre. While we invest in expanding manufacturing, it is time to pay attention to safeguarding existing operations. Companies that have committed billions to India’s manufacturing sector must be protected.Achieving bipartisan support from all political parties — remember CITU is affiliated with CPM — is crucial to strengthen and secure India’s manufacturing sector. We don’t need to follow China’s rulebook on manufacturing and workers’ rights, but a look at it will help in making our own rules.The writer heads a research group focused on trade, technology and climate change.