The Wall Street Journal (WSJ) reported on Tuesday (27th) that India is likely to become Apple’s new manufacturing favorite within this decade. This has a lot to do with Beijing’s missteps, but New Delhi also deserves credit for its efforts to make India an easier country to manufacture electronics and more attractive from an economic point of view.
The risk of over-concentration in the supply chain
The report pointed out that many Western manufacturers are uncomfortable with the degree of heavy dependence on China, especially after China’s uncompromising and unpredictable approach to public health in the past year. In addition, violent protests broke out at the Zhengzhou factory of Apple supplier Hon Hai (2317-TW) (Foxconn) last month, further highlighting the risk of excessive concentration in the supply chain.
India will play an even bigger role for Apple, where its huge domestic market and strong government support for electronics manufacturing put it in a good position to capitalize on “China plus One” (China Plus One) manufacturing strategy of favorable position.
Research firm estimates that 20% of the world’s iPhones will be made in India by 2025
According to the report, Apple has already assembled the iPhone 11, 12, 13 and 14 in India through three Taiwanese companies – Wistron (3231-TW), Hon Hai and Pegatron (4938-TW).
Counterpoint Research data shows that due to the more modular iPhone design, Indian factories can now produce iPhone 14 almost at the same time as Chinese factories. The research firm believes that 18% to 20% of the world’s iPhones will be manufactured in India by 2025, up from around 3% in 2021.
Apple did not respond to a request for comment on the report. Before the deadline, the intraday stock price of Apple (AAPL-US) fell 1.65%, to $129.68 per share.
The consumer market is the biggest attraction
Like China, what attracted Apple was the potential of India’s own consumer market. Ming-Chi Kuo, an analyst at TF International Securities in Hong Kong, believes that the potential of the consumer market is the main reason why Apple chose India as the second iPhone assembly location in the world. He also believes that in the next five years, India may not only become an important base for iPhone component assembly, but also an important base for iPhone component manufacturing.
The report pointed out that India’s advantage is not only the market potential, a large number of English-language software talents, and the government’s major incentives for electronic product manufacturing in recent years have helped attract new investments from companies such as Hon Hai and Samsung. In addition, India has almost the same population size as China, but has a higher birth rate, while Vietnam, another electronics manufacturing upstart, is constrained by a smaller market and labor force.
Infrastructure, government system, and weak supply chain are India’s 3 disadvantages
Nonetheless, India has its own challenges, such as insufficient infrastructure and weak upstream and downstream electronics supply chains. According to data from Counterpoint Research, in the Indian smartphone ecosystem, locally sourced components only account for about 14% to 15% of the total, and the rest are imported, with about four-fifths of them coming from China.
Nor can India match China in the central government’s ability to set priorities and bring local governments to its knees. The American states in India basically implement their own commercial policies, and India also has its own violent labor disputes, such as the 2020 dispute over a local factory run by Apple supplier Wistron.
India has a long way to go to catch up with China
It will be a long time before India catches up to China in size and efficiency for a global manufacturer like Apple, but changing demographics and China’s own inflicted damage mean it is the South Asian giant that is attracting Apple. .