Apple has experienced significant growth in iPhone exports from India, surpassing $2.5 billion from April to December. This amount is nearly double the total from the previous fiscal year, highlighting Apple’s efforts to shift away from its reliance on China amid rising geopolitical tensions.
Two major Apple suppliers, Foxconn Technology Group and Wistron Corp, have each exported over $1 billion worth of iPhones in the first nine months of the current fiscal year, ending in March 2023. Pegatron Corp, another key contract manufacturer for Apple, is expected to export around $500 million worth of iPhones by the end of January.
These increasing export numbers demonstrate Apple’s strategy to expand its operations beyond China. The chaos at Foxconn’s main plant in Zhengzhou, which exposed vulnerabilities in Apple’s supply chain and led to production output reductions, further fueled this strategic shift. Additionally, global demand for electronics has been declining as consumers consider the risks of a global recession.
Apple began assembling its latest iPhone models in India last year, deviating from its practice of relying heavily on Chinese factories operated by Taiwanese assemblers such as Foxconn. Although India currently represents a small portion of iPhone production, the growing exports indicate the country’s potential to become an alternative manufacturing hub to China.
The Covid Zero policies implemented in China and a violent incident at the Zhengzhou plant highlighted the dangers of relying solely on the country. As a result, Apple and other global companies are increasingly exploring alternative manufacturing locations.
India’s abundant workforce, support from Prime Minister Narendra Modi, and thriving local market make it an attractive candidate for expanding electronics manufacturing. Foxconn, Apple’s largest supplier, started establishing facilities in India more than five years ago in anticipation of the need to diversify geographically. The Indian government’s new incentives have also helped attract manufacturers, with Foxconn already receiving benefits of Rs 360 crore ($44 million) through the production-linked incentives scheme.
Bloomberg Intelligence suggests that India’s cost savings and market potential offer advantages to Apple’s iPhone supply chain. The country’s abundant labor supply and lower wages, which are about 50% lower than in China, are particularly appealing to electronics manufacturers with slim profit margins. India’s Production-Linked Incentives (PLI) program also provides subsidies of 4%-6% of production costs for five years, subject to meeting certain performance criteria.
While Apple’s contract manufacturers currently produce iPhones in southern India, production in the country is in its early stages. In 2021, approximately 3 million iPhones were manufactured in India, compared to 230 million in China.
Moving production away from China, where Apple has established a robust supply chain over nearly two decades, is a complex undertaking. Bloomberg Intelligence estimates that it would take approximately eight years to relocate just 10% of Apple’s production capacity from China, where about 98% of its iPhones are currently manufactured.
India closely monitors the production and exports of all smartphone manufacturers benefiting from financial incentives under Prime Minister Modi’s initiative.
In addition to smartphones, the country is strategically developing plans to enhance financial incentives for tablet and laptop manufacturers. The goal is to entice Apple to manufacture a wide range of products, including earphones and MacBooks, within India’s borders. India is also aiming to attract other renowned brands. Alongside these efforts, Apple is anticipated to establish its inaugural retail store in India by 2023, subject to meeting specific requirements imposed on foreign retailers.