“Giant” Apple has increased iPhone production in India in fiscal year 2023, with the value of iPhones assembled in the country increasing threefold to $7 billion, according to Bloomberg.
The US company has already produced nearly 7% of its iPhones in India by expanding its partnership from Foxconn to Pegatron, a significant leap for the South Asian country, as iPhone production here is estimated to account for just 1% of the world's iPhones in 2021.
Apple has been trying to expand its presence in the Indian market. Facing stiff competition from smartphone makers like Xiaomi (China) and Samsung (South Korea) in this market, Apple has been launching new products and offering attractive offers, including discounts on products.
Moving out of China
Apple 's move to increase production in India is part of a broader strategy to diversify its supply chain and reduce its reliance on China as tensions between Washington and Beijing continue to escalate.
“I think Apple will continue to rely on China for a significant portion of its production, but they are trying to diversify their supply base so that if something happens in China, they have some alternatives,” said Willy Shih, a professor at Harvard Business School. Shih calls this strategy China +1.
Apple has recognized the importance of diversifying its supply chain for years, but the pandemic’s impact on the world’s largest iPhone assembly plant in 2022 has made it more urgent than ever. The disruption caused by Covid-19 is estimated to cost the company $1 billion a week.
The disruption caused by the Covid-19 pandemic at Foxconn's factory in Zhengzhou, Henan Province, China in 2022 is one of the reasons why Apple is pushing to diversify its supply chain outside of this country. Photo: CNN
India is seen as Apple’s main hope for moving production out of China. The country is expected to overtake China as the world’s most populous country this year. Its abundant and cheap labor force, including many highly skilled engineers, is a big draw for manufacturers.
In addition, Asia's third-largest economy is also expected to be the world's fastest growing major economy despite lingering concerns about a global recession.
A 2022 report suggested that the country would produce about 25% of all iPhones by 2025, and that figure could rise to 50% by 2027.
Apple could start manufacturing its next iPhones in India at the same time as in China, starting in September this year. If this happens, it would be the first time that iPhone assembly begins in two countries simultaneously. It would also help Apple mitigate supply chain issues it faces in 2022.
CEO Tim Cook’s company will face enormous challenges in reducing its dependence on a technology supply chain built over decades in China, but it could reduce its reliance on the country by 20-40% by 2030, according to a Bloomberg analysis.
Destination of the future
Apple's move to increase production in India is seen as a major economic win for the South Asian country, and will help it move closer to its goal of becoming a world-leading electronics manufacturing hub, replacing China.
Additionally, India’s deepening ties with major US tech companies like Apple will help India attract more global businesses to its electronics manufacturing ecosystem.
It can be said that Apple has recognized India as a platform for future growth, as it not only increases production but also opens its first two retail stores in the country next week, one in Mumbai and one in New Delhi.
The importance of this market to the American "giant" is further confirmed when Apple CEO Tim Cook will personally fly to India to inaugurate these two stores.
Apple CEO Tim Cook is expected to travel to India to attend the launch of Apple stores in Mumbai and Delhi, and meet with Indian Prime Minister Narendra Modi. Photo: The Print
Apple products in India are currently manufactured by three partners: Foxconn, Wistron and Pegatron. Foxconn, Apple’s largest contract manufacturer, plans to invest about $700 million in a factory in a southern Indian state to make phone components, possibly iPhones.
The Indian government has recently launched a number of incentives to attract investment in the mobile phone manufacturing sector. These efforts have been successful. Samsung, the world's top-selling smartphone brand, has also boosted phone production in the South Asian country.
The South Korean electronics giant has also recently diversified its production locations away from China due to rising labor costs there and fierce competition with domestic Chinese brands such as Huawei, Oppo, Vivo and Xiaomi.
Samsung currently mass-produces phones in Vietnam and India, with India accounting for about 20% of its total global output.
In 2018, Samsung built a factory – dubbed “the world’s largest phone factory” – in Noida, near the capital New Delhi. Analysts say the South Korean company paved the way for other manufacturers to move production there .
Nguyen Tuyet (According to Bloomberg, India Today, CNN)
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