China probably had it coming; Apple Inc’s long-term partner is now losing ground as Apple has been exploring ways to lessen its reliance on China as tensions between Washington and Beijing persist.
Apple Inc. assembled more than $7 billion of iPhones in India last fiscal year, thus tripling production in one of the world’s fastest-growing smartphone sectors.
The US company now makes nearly 7% of its iPhones in India, a significant rise for India as it accounted for roughly 1% of the world’s iPhones in 2021.
Apple will open its first two retail stores in India next week, one in Mumbai’s financial hub and another in New Delhi’s capital. Chief Executive Tim Cook is scheduled to personally inaugurate the two stores, underscoring the rising importance of the domestic market.
China’s Loss India’s Gain
Apple, one of the largest technology companies in the world, has been facing manufacturing problems in China in recent years. This has resulted in delays in the production and delivery of some of its products, including the iPhone.
One of the main challenges that Apple has been facing in China is related to labour issues. There have been reports of poor working conditions and labour violations at some of the factories that manufacture Apple products. This has led to worker protests and strikes, which have disrupted production schedules.
In addition to labour issues, Apple has also faced supply chain disruptions due to the COVID-19 pandemic. Many of the factories that produce components for Apple products were forced to shut down or reduce their output during the height of the pandemic, leading to delays in the production of some products.
The world’s most valuable company had a tough last year when it struggled with utter chaos at “iPhone City”, Foxconn‘s main complex in Zhengzhou. This led to major vulnerabilities in Apple’s supply chain and compelled it to cut output estimates.
Furthermore, the trade tensions between the US and China have added to the challenges faced by Apple in China. The ongoing trade war has led to increased tariffs on some of the components used in Apple products, which has increased the cost of production.
This, in turn, has led to higher prices for consumers and reduced demand for some of Apple’s products.
To address these challenges, Apple has been working to diversify its supply chain and reduce its dependence on China.
The company has been investing in production facilities in other countries, including India and Vietnam, and has been encouraging its suppliers to move production to other regions as well.
To make India an attractive destination for Apple Inc, Indian Prime Minister Narendra Modi has announced various incentives to boost local manufacturing.
Apple exported $5 billion of iPhones in the year ended March 2023, nearly four times as much as the previous period of total production.
In the fall of 2023, Apple will likely try to manufacture the next iPhones in India and China simultaneously.
If it does so achieve this, it will be the first time that iPhone assembly will begin together in the two countries. And if the aggressive expansion of its suppliers continues, Apple could assemble a quarter of all its iPhones in India by 2025; however, there has yet to be a public statement regarding this from company officials.
The Need For Diversification
Apple has increasingly understood the need to diversify its supply chain. It successfully lobbied for incentives in India and pushed suppliers Foxconn, Wistron Corp. and Pegatron to ramp up locally. In India, the trio employs nearly 60,000 workers and makes models ranging from the iPhone 11 to the latest iPhone 14.
India’s Manufacturing Initiative
That’s helped place Apple at the heart of India’s ambitions to become a significant manufacturing hub and alternative location to China. Apple is among the world’s most stringent when it comes to manufacturing: its production chain encompasses hundreds of companies across the globe and employs millions, much of that is now in China.
For India, the migration of iPhone production represents an economic triumph that could have important implications in attracting other US brands. For Apple, the country represents a fount of future growth when the Chinese economy is sputtering after years of punishing Covid Zero restrictions.
Reducing exposure to China’s dominance in the technology supply chain built over decades will face significant challenges; however, analysts have agreed that it indicates that dependence could be reduced by 20-40% in most cases by 2030.
While geopolitical tensions and government and company policies are prompting moves to diversify geographically, it will take years of investment to significantly untangle from China’s complex, efficient and skilled supply chain from semiconductors to hardware to assembly.
Labour Law Changes In India
Meanwhile, Cupertino, California-headquartered Apple, has also desired changes in India’s labour laws as part of its step to expand local production and create mega factories, and regional governments are heeding its request in order to provide an alternative to iPhone assembly from China to India.
Its largest contract manufacturer, Foxconn, plans to invest about $700 million to make phone components and possibly iPhones in a plant in a southern state.
Foxconn Technology Group, Apple’s top supplier, operates India’s largest iPhone plant in India’s southern Tamil Nadu state, which is mulling passing new rules that will make factory shifts more flexible.
According to reports, Apple Executives and the Indian Cellular and Electronics Association lobby group that represents the US company as well its suppliers – Foxconn, Wistron Corp and Pegatron Corp. met with state government officials for over six months to push for the reforms. They said the intended changes would bring local working hours on par with the iPhone factories in China.
The state of Karnataka, which houses Wistron’s iPhone plant and where Foxconn is set to build a new $700 million facility, passed legislation in recent weeks to allow for labour rule changes.
The actions are part of Apple’s effort to shift more production away from China to other countries, including India. Also, the Indian government’s local manufacturing push, financial incentives as well as India’s fairly cheaper labour have moved Foxconn, Pegatron and Wistron to ramp up in the South Asian nation.
In Conclusion: While in India, labour reforms are rare, the willingness shown by the state and central governments indicates the intention and sincerity toward how India wants to become a destination for manufacturing, and this is amply demonstrated by the changes its willing to make to accommodate Apple Inc.
The suggested changes include allowing factories to operate two shifts of 12 hours each instead of the previous three shifts; each went on for eight hours.
Local officials are keen to attract the business and jobs that the world’s most valuable tech company represents. The envisioned changes could also encourage more women to work in factories. By having more flexible shifts, women could avoid commuting on night buses — which are often considered unsafe. Two of the people said that Apple and its suppliers are also in talks to build large working women’s hostels in and around factory complexes, which would reduce travel time.
