8.1 Samsung Electronics' 30 Years: 1995 Entry, World's Largest Smartphone Factory, and AI Transition

July 9, 2018, Noida, on the outskirts of New Delhi. Prime Minister Narendra Modi stood on one side, and President Moon Jae-in stood on the other. Spread out before them was a factory the size of twenty-four soccer fields. It was the inauguration of Samsung Electronics' new Noida factory. Prime Minister Modi remarked, "When Korean technology meets Indian manufacturing, the world's best products will be born." That factory was the world's largest mobile factory in a single building, capable of producing 120 million mobile phones annually. A single photograph of the two leaders standing side-by-side pressing a button encapsulated the relationship between Korean corporations and the Indian government.

This factory was not always this massive. When Samsung Electronics first stepped onto Indian soil in 1995, the Noida facility was a small operation where a few hundred employees assembled TVs. At the time, India had opened its doors through economic liberalization in 1991, but the shadow of the 'License Raj' still loomed large over the streets. In an era where bureaucrats held all sorts of licensing power, India was both an opportunity and a maze for foreign companies.

Samsung was a company determined to walk through that maze. It established a factory in Noida in 1996 to begin TV production and expanded its production line to refrigerators in 2003 and mobile phones in 2007. It did not leap all at once but climbed up one step at a time. This 'step-by-step localization' was a textbook approach to navigate India's complex tariff structure and meet local component mandatory usage ratios.

The secret to Samsung's survival in India lay in its adherence to the principle of 'Making in India, for India.' India's voltage is unstable, and power outages are frequent. Samsung specifically designed TVs and refrigerators that would not break even when the voltage fluctuated. They equipped products with powerful sound features favored by Indian consumers and developed data-saving modes considering the high cost of data. These features were not born at the Seoul headquarters but at Samsung's Indian research centers in Bengaluru and Noida. The Bengaluru center is a major Samsung software research hub outside of Korea, where thousands of Indian engineers are employed.

The expansion of the Noida factory in 2018 marked a turning point where Samsung's India strategy shifted from quantity to quality. Samsung invested $700 million to double its production capacity from 68 million units to 120 million units. Galaxy smartphones made at this factory were not just sold within India; they were exported to the Middle East, Africa, and Europe. Prime Minister Modi's slogan, 'Make in India, Make for the World,' became a reality at this factory (see Chapter 7, 7.3).

The Modi government's Production Linked Incentive (PLI) scheme fueled this growth (see Chapter 4, 4.2). This system, where the government pays cash subsidies for increasing production in India, saw Samsung become a leading global company to receive these benefits. In Korean terms, it is similar to the government giving a prize to companies that run their factories extensively. For Samsung, a structure was completed where the more they manufactured in India, the greater their profits became. Under the PLI scheme, Samsung receives incentives across various sectors including smartphones, IT hardware, and electronic components, accelerating its efforts to reshape India into a global export hub rather than just a domestic market.

Now, 30 years later, Samsung is entering a new phase in India: the 'AI Transition.' 'Galaxy AI,' which incorporates artificial intelligence into smartphones to provide real-time translation for Hindi and other regional Indian languages, received an explosive response in a country where 22 official languages are used. AI is also at work inside the factories. Manufacturing AI that automatically filters out defective products and self-regulates processes in environments with unstable power is boosting productivity at the Samsung Noida factory.

However, the story is not without its shadows. In September 2024, 1,500 workers stopped working at the Samsung home appliance factory in Sriperumbudur, near Chennai. Signs reading 'Indefinite Strike' were erected in front of the factory. The workers had three demands: a wage increase from 25,000 rupees to 36,000 rupees, an 8-hour workday, and the recognition of their newly formed labor union. The Centre of Indian Trade Unions (CITU) supported the strike, and local politicians stood with the workers.

The strike lasted for 37 days. Samsung responded firmly, calling it an 'illegal strike,' and after mediation by the Tamil Nadu state government, the strike ended on October 16. Samsung agreed to pay a productivity incentive of 5,000 rupees per month, but the issue of union recognition moved to the courts. On January 27, 2025, following an order from the Madras High Court, the Samsung India Workers' Union (SIWU) was officially registered. This was the second instance worldwide where a union was officially recognized at a Samsung Electronics factory. The first was Samsung Austin Semiconductor in Texas, USA, where union representation rights are recognized.

This strike held significance beyond a mere wage dispute. It was a signal that as the Indian economy grows, workers' awareness of their rights is rising accordingly. It was a scene reminiscent of Korea's great workers' struggle in 1987. The demand that the fruits of high growth reach the people working inside the factories is a voice that inevitably emerges at a certain stage of economic development in any country.

Samsung Electronics' 30 years in India overlap with the growth graph of Modinomics. A small factory that assembled a single TV in 1995 has become the world's largest manufacturing hub, churning out 120 million smartphones a year. In the process, Samsung became a company that Indians want to work for and a success story the government wants to boast about. Simultaneously, it stands before a new challenge: labor issues. This is because India itself is changing.

8.2 Hyundai Motor's Challenge and Success: 1996 Sole Investment, 2024 Largest IPO

In 1998, a strange rumor circulated among Indian car dealers. It was said that a car company from Korea had built a car with a raised roof so that the heads of turban-wearing Sikhs would not touch the ceiling. The name of that car was the Santro. It was Hyundai Motor's first strategic model for the Indian market. This small car, nicknamed the 'Tall Boy,' sold tens of thousands of units in its first year and joined the ranks of India's national cars. The idea of building a car that fits the Indian physique was the seed of Hyundai's success myth in India.

Hyundai Motor first set foot in India in 1996, two years before the Santro's launch. They broke ground for a factory in Chennai, in the southern state of Tamil Nadu. At the time, most global car companies entered India by forming joint ventures with local Indian firms to share the risks. The Indian market was dominated by the giant Maruti Suzuki, road infrastructure was poor, and tariffs and regulations were as complex as a maze. Jumping into such a market alone was akin to a reckless gamble for a foreign company.

Chairman Chung Mong-koo chose the gamble: 100% sole investment. This meant Hyundai would make all decisions without a joint venture partner. The core of this decision was quality. He judged that having a joint partner would slow down decision-making and make it difficult to maintain the level of quality control Hyundai desired. Chairman Chung's philosophy that 'quality cannot be compromised,' established in Korea, was carried through to India.

This bold move succeeded due to thorough localization. Hyundai equipped its cars with heavy-duty suspensions to withstand India's bumpy roads, powerful air conditioners to beat the heat that soars to 50 degrees Celsius, and high-durability horns considering the culture of frequent honking. Establishing a supply chain to procure over 90% of parts locally in India was also decisive. Ford and GM entered India only to withdraw after losing trillions of won. While those two companies tried to apply global standards to India, Hyundai created new Indian standards. That difference determined their fates.

In the mid-2010s, a wind of change blew through the Indian auto market. After the Modi government took office, road infrastructure improved, and as middle-class incomes rose, demand for SUVs exploded. Hyundai read this trend accurately. They released a compact SUV called the Creta, which dominated the Indian SUV market. While Maruti Suzuki focused on small hatchbacks, Hyundai came to compete for the top spot in the new battlefield of SUVs. As of 2024, 63% of Hyundai's sales in India are SUVs.

The Chennai factory is not just a place to sell cars within India. It serves as a hub for exporting cars to over 80 countries, including Africa, the Middle East, and South Asia. Hyundai had been practicing Prime Minister Modi's slogan of 'Made in India for the World' even before the Modi government was inaugurated (see Chapter 7, 7.2).

In October 2024, Hyundai wrote another chapter of history in India. It listed its Indian subsidiary (HMIL: Hyundai Motor India Limited) on the Mumbai stock exchange. The offering size was $3.3 billion (approximately 2.787 trillion rupees), or about 4.5 trillion Korean won. It was the largest Initial Public Offering (IPO) in the history of the Indian stock market. They offered 142.19 million shares at 1,960 rupees per share, and with a surge of institutional investors, the overall subscription was oversubscribed by 2.37 times.

On the first day of listing, the stock price closed at 1,819 rupees, down 7% from the offering price. The market's assessment was that it was 'sold too expensively.' There were also concerns about the royalty costs paid to the Korean headquarters. The enterprise value at the time of listing was estimated at about $19 billion. The first-day decline showed that the Indian capital market applies a cold standard even to foreign companies.

Nevertheless, the meaning of this IPO runs deeper than stock price fluctuations. Through the listing, Hyundai shed the label of a 'foreign company' and became a company where the Indian public participates as shareholders. In Korean terms, it is as if a foreign car company listed on the Korean stock exchange and Koreans were buying and selling its shares. This was a strategic decision that fundamentally changed Hyundai's position within Indian society, beyond just raising capital. When facing government regulations or labor disputes, the presence or absence of a perception that it is 'our company' makes a significant difference.

From the 1996 groundbreaking ceremony of the Chennai factory, which no one paid attention to, to the largest IPO in Indian history in 2024. It took 28 years. The density of that journey is by no means light.

8.3 LG, POSCO, and 550 Companies: Household Appliance Dominance, Steel Mills, and Entry into Diverse Industries

In an Indian home, a mosquito flies away while watching TV. It sounds like a joke, but it is a real product. The 'Mosquito Away TV' made by LG Electronics for the Indian market emits ultrasonic waves that are inaudible to humans but hated by mosquitoes. In a country where malaria and dengue fever infect hundreds of thousands every year, the TV has become an appliance that protects health. This single product explains LG's India strategy: adapting technology to the lives of Indians is how LG came to dominate the Indian appliance market.

LG Electronics, which entered India in 1997, was obsessed with studying the daily lives of Indian consumers. Realizing that vegetarians make up a significant portion of the population, they greatly enlarged the vegetable storage compartments in their refrigerators. They added the 'Evercool' feature to keep refrigerators cold even during frequent power outages. They equipped refrigerators with a dedicated fermentation function to make 'Curd,' the yogurt Indians enjoy. They even made microwaves with a 'Tandoori Mode' tailored to spicy Indian food. As these products accumulated, LG became a 'brand that understands our lives' rather than a foreign company in the eyes of Indian consumers.

The results were reflected in the numbers. LG Electronics holds the number one market share in the Indian refrigerator and washing machine markets and maintains a top-tier position in the TV and air conditioner markets. It operates large-scale factories in Noida and Pune, employing over 15,000 local staff. LG Electronics announced the construction of a new $600 million factory in Sri City, Andhra Pradesh. This factory was designed as a 'regional hub' targeting exports to neighboring countries like the Middle East and Bangladesh in addition to the Indian domestic market. As the Modi government supplies power even to rural areas across India, potential customers for LG appliances are emerging in every village that receives electricity.

While LG conquered the consumers' living rooms, POSCO sought to supply steel, the backbone of Indian industry. POSCO's story in India is less a tale of success and more a record of endurance. In 2005, POSCO signed an ambitious Memorandum of Understanding (MOU) to build a $12 billion integrated steel mill in the eastern state of Odisha. It was a scale comparable to the Pohang Steel Works in Korea.

However, this project stopped before a single shovel could hit the ground. Residents living on the factory site refused to relocate, and environmental groups staged protest movements. The state government tried to acquire the land, but the courts stepped in. After the project drifted for over 10 years, POSCO eventually had to scrap the Odisha project. In Korean terms, it is similar to a large-scale industrial complex construction being abandoned after wandering for over 10 years due to resident opposition and administrative lawsuits. POSCO learned a costly lesson: in India's federal structure, no matter how much the central government welcomes a project, it can be halted if the state government and local communities block it (see Chapter 3, 3.2).

POSCO changed its strategy. Instead of a massive integrated steel mill, it pivoted toward a processing-focused business producing cold-rolled steel sheets for automobiles in the state of Maharashtra. The steel sheets from this factory are supplied not only to Hyundai and Kia but also to major Indian automakers such as Tata Motors, Mahindra, and Volkswagen. As the Indian auto industry grows, so does POSCO's presence. POSCO is now exploring the construction of a green-steel integrated mill in partnership with the Adani Group. The vision is to implement a hydrogen-based steelmaking process in India to reduce carbon emissions. This persistence—falling in Odisha, rising in Maharashtra, and now challenging again in the new arena of green steel—might be the very way to survive in India.

Beyond Samsung, Hyundai, LG, and POSCO, there are invisible companies. More than 550 Korean companies are spread across India. Hyosung operates a spandex factory, and Lotte has captured the taste buds of Indians with Choco Pie. Mirae Asset has achieved rare success for a foreign asset manager in the Indian financial market, with assets under management exceeding trillions of won. KB Kookmin Bank, Shinhan Bank, and Woori Bank have opened local branches, targeting both corporate and retail finance.

The name of Korea also appears in the defense industry. Hanwha Aerospace's K-9 self-propelled howitzer is being produced locally in India via technology transfer under the name 'Vajra' (meaning 'lightning' in Hindi). Game company Krafton's 'Battlegrounds Mobile India (BGMI)' has become a national game among Indian youth. Though often hidden in the shadows of larger conglomerates, these companies have permeated every corner of the Indian economy, from parts, materials, and logistics to finance, food, and gaming. The structure where large corporations pave the way and medium-sized companies and suppliers follow is turning Korean entry into India into an entire ecosystem rather than just a venture by a few firms.

8.4 Semiconductor Ambitions and Korea: ISM 70% Subsidy, Participation of Simmtech and Samsung

Prime Minister Modi has one great regret. "India had a chance to start semiconductors 50 to 60 years ago. We missed that bus then." He has repeated this story in several speeches. In the 1960s, there were seeds of semiconductor research in India, but under government indifference and bureaucracy, those seeds failed to sprout. During the same period, Korea embarked on the path of semiconductors through a company called Samsung, and Taiwan nurtured TSMC to occupy more than half of the world's foundry market. India became a country overflowing with talent for designing chips but without a single factory to manufacture them.

Prime Minister Modi declared that this time, he would sit in the driver's seat of the bus. That declaration took shape as the India Semiconductor Mission (ISM). The core of this policy is money. The central government subsidizes 50% of the project cost for companies building semiconductor factories, and the state government subsidizes another 20%. The company only needs to bear 30% of the total cost. It is an extraordinary condition where the government provides 70% of the project funding. In Korean terms, it would be as if the government gave Samsung 70% of the construction cost in cash when building a semiconductor factory in Pyeongtaek. A subsidy of this scale is aggressive even compared to the US CHIPS Act or Europe's Chips Act.

The first to respond to these exceptional conditions was Micron of the United States. Micron decided to build a semiconductor Assembly, Test, Mark, and Pack (ATMP) facility in Sanand, Gujarat. It is a $2.75 billion project. Sanand is an industrial city that Prime Minister Modi has been developing since his time as Chief Minister of Gujarat (see Chapter 7, 7.3). The fact that a semiconductor factory is being built on industrial infrastructure directly designed by Modi carries symbolic meaning.

Korean companies are also jumping on this trend. Simmtech, a company specializing in semiconductor printed circuit boards (PCBs), decided to build a factory near the Micron plant. This is an investment of approximately $150 million. Semiconductors are not completed by the chip alone. A substrate to hold the chip is required, and manufacturing that substrate requires precise technology. Simmtech is a company with global competitiveness in this field. While it is a form of joint entry as a supply chain partner for Micron, the Indian government's active recruitment efforts and subsidy support played a decisive role.

The significance of Simmtech's entry goes beyond its scale. A semiconductor ecosystem is not completed by a single factory. There must be a substrate company next to the chip manufacturer, a packaging equipment company, and even companies to manage clean rooms. Simmtech's entry means the first Korean link in this ecosystem has been forged. Once one company enters, suppliers follow, and once suppliers enter, other companies take their place next to them. The floodgates have opened for Korean semiconductor component companies to move to India.

The Indian government's courtship of Samsung Electronics is persistent. Every time Prime Minister Modi meets with Samsung executives, he has requested semiconductor investment. Samsung has not yet made an official announcement about building a semiconductor fabrication plant (fab) in India. A semiconductor fab is a massive investment that must calculate hundreds of variables, including power, water, wastewater treatment, supply chain, and geopolitical risks. Building a factory in Pyeongtaek, Korea, or Texas, USA, involves different risks than building one in India. However, Samsung is dipping its toes into the Indian semiconductor ecosystem by having thousands of Indian engineers participate in semiconductor design and software development at its research centers in Bengaluru and Noida. This is a strategy of weighing the timing for a manufacturing entry while maintaining an R&D base in India.

The movements of homegrown Indian companies are also noteworthy. Tata Electronics announced it would build a semiconductor fab in Gujarat in partnership with Taiwan's PSMC (Powerchip Semiconductor Manufacturing Corporation). The fact that India's largest conglomerate, the Tata Group, has jumped into semiconductor manufacturing means this industry has moved beyond national will into a realm of substantial investment by private capital.

India's semiconductor ambitions are both an opportunity and a test for Korea. The extraordinary 70% subsidy and a market for electronic products with a population of 1.4 billion are attractive. At the same time, unstable power, a lack of ultra-pure water, and complex bureaucracy threaten the basic conditions for semiconductor manufacturing. Nevertheless, the money and will India is pouring into semiconductors are serious. Depending on what position Korean companies take in this arena, the center of gravity for the economic relationship between the two countries for decades to come may change.

8.5 Challenges and Issues: Power Outages, Water Quality, Bureaucracy, Labor Conflicts, and Tax Terrorism

At the Samsung Electronics Noida factory, diesel generators run without rest in the summer. India's power grid cannot handle the demand when summer heatwaves arrive. Power is cut without notice, and voltage fluctuates. If power is interrupted for even a second on a smartphone production line, the product in process becomes defective. Therefore, Samsung maintains its own power generation facilities inside the factory. This is to avoid stopping the production line, even if it means burning diesel that is several times more expensive than regular electricity. This is something unimaginable in Korea, where the stability of industrial power supply is among the best in the world. Running a factory in India also means 'building another power plant next to the factory.'

The water problem is even trickier than power. Semiconductor and display manufacturing require massive amounts of Ultra Pure Water—water with extremely few impurities. India is a chronically water-scarce country. Chennai experienced a severe water shortage in 2019 that nearly paralyzed city functions. Floods occur during the rainy season, while reservoirs dry up during the dry season. Climate change is further increasing this volatility. Korean companies are responding by building their own water purification and wastewater recycling systems within their factories, but this is an added cost. Even if the Indian government offers a 70% subsidy to attract semiconductor factories, those factories cannot operate at full speed if basic infrastructure like power and water does not keep up.

Bureaucracy is an issue complained about by every foreign company doing business in India. Prime Minister Modi promised to "remove the red tape of bureaucracy and roll out the red carpet for investors." India's ranking in the World Bank's 'Ease of Doing Business' index jumped from 142nd to 63rd. In terms of numbers, it is a great advancement. The landscape on the ground is a bit different.

Even if the central government introduces policies welcoming foreign investment, the story often changes at the level of state governments and local bureaucrats. Legal disputes during the land acquisition process can last for years, and the interpretations of tax authorities can change unpredictably. In India, this is called 'Tax Terrorism.' There is a reason this expression is not an exaggeration. Finland's Nokia faced a retroactive tax claim worth hundreds of billions of won from tax authorities while operating its Indian factory. The case of the UK's Vodafone was even more dramatic. When Vodafone acquired Indian operations from Hong Kong's Hutchison Whampoa in 2007, Indian tax authorities retroactively levied a capital gains tax of about $2 billion on the transaction. Although the Indian Supreme Court ruled in favor of Vodafone, the Indian Parliament amended the law in 2012 to legalize retroactive taxation. Taxing a transaction that was already completed was possible in India. It was not until 2021 that the Modi government abolished this retroactive tax provision and refunded the collected amount to Vodafone, but the image of 'Tax Terrorism' remains ingrained in the memories of foreign investors (see Chapter 10, 10.4).

Korean companies are not free from these risks. Instances occur on the ground where classification standards for component import tariffs change or where the payment of promised incentives is delayed.

POSCO's Odisha project is a representative example. The central government was very welcoming, but the project was blocked for over 10 years by land acquisition and environmental permits at the state government level. No matter how strong Prime Minister Modi's will may be, in India's federal structure, central policies often fail to be consistently implemented down to the local level. This 'implementation gap' is a variable that Korean companies must take into account when planning business in India.

Labor-management conflict is a rapidly emerging risk factor. The 37-day strike at the Samsung Chennai factory in 2024 became a new milestone for the Indian labor movement. It was a signal that Indian workers' awareness of their rights is growing as fast as the economic growth rate. Workers demanded three things: a wage hike, an 8-hour workday, and union recognition. The strike was led by the Centre of Indian Trade Unions (CITU), an organization linked to the Communist Party of India (Marxist). The Madras High Court's order for the official registration of SIWU was a judgment where the judiciary prioritized the workers' freedom of association over the employer's opposition. This ruling could act as a precedent for other Korean companies in India. Just as the farmers' resistance to the agricultural reforms pushed by the Modi government grew into a massive social movement (see Chapter 5, 5.3), social conflicts accompanying economic growth are an unavoidable challenge.

In India, labor unions have a different meaning than in Korea. Indian unions are closely linked to political parties. When a strike begins, local politicians side with the workers, and labor disputes become political issues. It turns into a power struggle between the corporation and political forces. There are also points where Korea's unique 'Palli-palli' (hurry-hurry) culture and vertical management style clash with the discussion culture and rights awareness of Indian workers. It is difficult for local employees to understand from the start the quality standards at a Samsung factory that do not allow even a 0.1mm error. The distance between the Indian-style flexibility of 'Chalta Hai' (it's fine, it'll do) and Korean-style precision can only be narrowed through education and time.

High turnover rates of skilled personnel are also a problem. The value of India's excellent engineers is rising rapidly, and the competition for talent among companies is fierce. This means India's appeal as a 'low-wage production base' is gradually being diluted.

Despite all this, no Korean company can leave India. A population of 1.4 billion, a large economy growing rapidly in the world, and a young workforce with an average age of 28. The gravity created by these numbers is irresistible. The manufacturing infrastructure Samsung has built over 30 years, the parts supply chain Hyundai has established over 28 years, and the brand trust LG has carved deep into Indian households were not made overnight. When power failed, they ran generators; when water was scarce, they built purification facilities; and when blocked by bureaucracy, they found detours. That accumulation of endurance has made 550 Korean companies part of the Indian economy.

India is a land of promise and a land of patience. For Korean companies, India is not a 'Next China' to replace China. India is India. It is a massive game board where completely different rules than China apply, and learning those rules takes time.