In a significant strategic shift, Apple (NASDAQ:AAPL) unveiled its iPhone 16 lineup, the Apple Watch, and new AirPods, set to be available on September 20. This launch marks a historic move for Apple as it begins manufacturing its iPhone Pro models in India, symbolizing a major pivot away from reliance on Chinese manufacturing. This move is also a milestone for the Indian government, which seeks to position the nation as a leading global hub for consumer electronics manufacturing. Apple’s manufacturing diversification aligns with its broader strategic vision to mitigate risks associated with geopolitical tensions and supply chain disruptions.
Apple initiated its iPhone assembly operations in India in 2017 with the iPhone SE. The process accelerated during the COVID-19 pandemic when lockdown-related protests in China significantly disrupted production. Consequently, Apple, alongside other tech giants like Microsoft (NASDAQ:MSFT) and Amazon, began exploring alternative manufacturing locations, including India and Vietnam. This diversification is not new, but the scale and ambition of Apple’s current strategy are unprecedented.
In the last fiscal year ending in September, Apple doubled its iPhone production in India, achieving $14 billion worth of output. Today, one in seven iPhones sold globally is manufactured in India, and Apple aims to increase this to 25% of its total production within the next four years. The partnership with Foxconn, which has invested $1.5 billion in new facilities across several Indian states, underscores the rapid expansion of iPhone production capabilities in the region.
Foxconn’s Significant Investment
Foxconn, Apple’s largest Taiwanese contractor, has committed substantial resources to enhance iPhone production in India. The investment includes $1.5 billion in Tamil Nadu, a $600 million plant in Karnataka, and a $500 million plant in Telangana, all dedicated to assembling iPhone 16 Pro and Pro Max models. These state-of-the-art factories will bolster India’s status as a critical player in Apple’s supply chain, with Foxconn now producing two-thirds of all iPhones made in India.
Government Support and Incentives
The Indian government has been actively supporting this shift by offering generous subsidies to Apple’s manufacturing partners, like Foxconn, through schemes like the production-linked incentive (PLI) program. This scheme provides annual revenue-based payouts to offset the high fixed costs of setting up new plants. The PLI scheme aims to distribute $20 billion over five years, thus attracting significant investment from global technology firms into the country.
Moreover, geopolitical tensions between India and China have further incentivized Apple to move its production to India. The 2020 border dispute led India to ban several Chinese-owned companies and impose high tariffs on Chinese electronics, complicating Apple’s market expansion efforts in the region. Despite these challenges, Apple’s sales in India surged by 33% in the year ending March, reflecting the growing demand for its premium products among India’s burgeoning middle class.
Apple’s first retail store in India opened in 2023, marking another significant milestone. CEO Tim Cook described India as a “huge opportunity” in a June 2023 interview, highlighting the company’s commitment to the Indian market despite its current 6% share of the country’s smartphone market. This strategic shift to India is expected to not only mitigate risks associated with geopolitical tensions but also tap into the growing consumer base in the region.
Apple’s decision to expand its manufacturing footprint in India marks a pivotal moment for both the company and the Indian economy. This move showcases Apple’s proactive approach to risk diversification and supply chain stability. As the Indian government continues to offer incentives and support, the collaboration promises to transform the country into a major player in global electronics manufacturing. This strategic realignment is likely to have far-reaching impacts on the tech industry, presenting new opportunities and challenges in the rapidly evolving global market.
