The ‘Made in India’ era of the iPhone began when Apple broke with China?

New Delhi

When Apple looks beyond China to ensure critical supply chains are stressed by the Covid lockdown and threatened by rising geopolitical tensions, India has emerged as a potentially attractive alternative to the world’s second-largest economy.

And Beijing’s major regional rival did not miss this opportunity. One of India’s top ministers said last month the California-based company wants to increase production in the South Asian country to a quarter of its total.

Trade and Industry Minister Piyush Goyal said Apple produces between 5% and 7% of its products in India. “If I am not mistaken, they are aiming to increase their production by up to 25%,” he said at an event in January.

His comments come at a time when Foxconn

A top supplier to Apple, is looking to expand its operations in India after severe supply disruptions in China.

for several years, Apple has relied on its vast manufacturing network in China to mass produce iPhones, iPads, and other popular products. But its reliance on the country was tested last year by Beijing’s strict Covid-free strategy, which was quickly scrapped last December.

Since the middle of last year, Apple has doubled down on investing in India. But can Asia’s third-largest economy deliver?

“It’s theoretically doable, but it’s not going to happen overnight,” said Tarun Pathak, research director at market research firm Counterpoint.

“[Apple’s] The reliance on China is the result of almost two and a half decades of what China has invested in developing its entire electronics manufacturing ecosystem,” Pathak said, adding that the company manufactures nearly 95% of my phones are in China.

Apple did not respond to CNN’s request for comment.

But the world’s most valuable company shocking post weak income this month, partly due to its recent problems in China. The troubles begin in Octoberwhen workers started fleeing the world’s largest iPhone factory run by Foxconn because of the Covid outbreak.

Lack of workers, Foxconn rewards workers who return to work. But violent protests broke out in November, when newly hired employees said management hadn’t kept their promises. The workers clashed with security officers, before the company finally offered them cash to quit and leave the site.

While activities at the large campus in Zhengzhou, central China, are now back to normalSupply issues impacted the supply of iPhone 14 Pro and iPhone 14 Pro Max models during the key holiday shopping season.

Foxconn did not respond to a request for comment.

Workers at a Foxconn factory on September 4, 2021 in Zhongmu county, Zhengzhou city, Henan province of China.

Above all, US-China relations seems to be getting more and more tense. Last year, the Biden administration forbidden Chinese companies buy advanced chips and chip-making equipment without a license.

“I think they will continue to depend on China for a significant percentage of production,” Willy Shih, a professor at Harvard Business School, said of Apple.

“But what they are trying to do, and I think that makes sense, is add diversity to their supply base so that if something goes wrong in China, they have a number of alternatives.”

Shih calls this strategy “China +1 or China + more than one.”

“India is a hugely exciting market for us and a major focus,” Apple CEO Tim Cook said on a recent earnings call.

“Looking at the business in India, we have recorded quarterly revenue and very strong double-digit growth year over year and so we are very pleased with the performance,” he said. mine”.

India is set to pass China this year becomes the most populous country in the world. The country’s abundant and cheap labor force, including workers with vital technical skills, is a big draw for manufacturers.

Asia’s third-largest economy also offers a growing domestic market. In 2023, as fears of a global recession persist, India is projected to remain the world’s fastest-growing major economy.

If it can maintain that momentum, India can become the third country with GDP value 10 trillion dollars by 2035according to the Center for Economic and Business Research.

Analysts say India’s growing consumer base could give it an edge Vietnamhas also been attracting greater investment in electronics manufacturing.

Government of India has implemented policy to attract investment in mobile phone manufacturing. According to Counterpoint’s Pathak, India accounts for 16% of global smartphone production, while China accounts for 70%.

There are a few success story: Samsung, the world’s best-selling smartphone brand, was one step ahead of Apple and already manufactures a lot of phones in India.

An employee checks the quality of a mobile phone's camera on an assembly line at a unit of Foxconn Technology Co., in Sri City, Andhra pradesh, India.

The Korean giant has been diversifying far away from China because high labor costs and stiff local competition from local players such as Huawei, Oppo, Vivo and Xiaomi.

It currently manufactures the majority of its phones in Vietnam and India, with India accounting for 20% of Samsung’s global production.

In 2018, Samsung opened what it called “the world’s largest mobile factory” in Noida, a city near New Delhi, and analysts say the company may have paved the way for manufacturers. other.

Apple devices are manufactured in India by Taiwan’s Foxconn, Wistron and Pegatron. Until recently, the company usually only started assembling models in the country seven to eight months After booting. That changed last year, when Apple started manufacturing the new iPhone 14 devices in India weeks after they went on sale.

Some of Apple’s biggest contractors have pumped more money into India. Last year, Foxconn announced it had invest half a billion dollars in subsidiary in India.

Earlier this week, the government of the southern Indian state of Karnataka speak it is “seriously discussing investment plans” with the Taiwanese giant. Foxconn already has factories in Andhra Pradesh and Tamil Nadu.

However, manufacturing in India comes with a multitude of challenges. According to the World Bank, it accounts for only 14% of India’s GDP and the government has struggled to increase that number.

“One of the things that China has done is they build infrastructure where they can. And I think India didn’t build the infrastructure when they could,” Shih said, referring to highways, ports and transport routes that allow goods to move easily.

An aerial view of Mumbai Metro Line 7 between Andheri East station and Aarey Metro station on the Andheri (East)-Dahisar (E) line on the Western Express Expressway, on July 26, 2022 in Mumbai , India.

Apple will also face more bureaucracy in India if it wants to create sprawling Chinese-style campuses.

“Can India copy the Shenzhen version?” Pathak asked, referring to China’s manufacturing hub. Building such “hot spots” will not be easy, he added, and will require India to think about issues ranging from logistics and infrastructure to labor availability.

Experts told CNN that access to land in a turbulent democracy like India can be challenging, while the Chinese Communist Party faces fewer barriers to quickly appropriating real estate for various reasons. that they consider important.

India will also have to think about going beyond just assembling iPhones through favorable government policies.

“You need to source parts locally, which means you need to attract more companies in the supply chain to set up shop in India,” says Pathak.

Some of the biggest businesses in India may be stepping up. Based on BloombergAutomotive-aviation group Tata Group is in talks with Wistron to take over the Taiwanese company’s factory in southern India.

Tata and Wistron did not respond to requests for comment.

“I’m not directly involved in that, but it’s really good for India as it will give India an opportunity to manufacture electronics and microelectronics,” said N. Ganapathy Subramaniam, COO of Services consulting Tata, the group’s software services arm, says Bloomberg.

Despite significant setbacks in India’s ambition to deepen ties with Apple, doing so would be a huge boost for the country and Prime Minister Narendra Modi.

‘I think it will be [a] big win, big win,” said Pathak, noting that a growing manufacturing relationship with an American giant like Apple will in turn attract other global players in the power generation ecosystem. death to India. “You focus on the big, the others follow.”

— Catherine Thorbecke and Juliana Liu contributed reporting.


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