Apple wants to switch its production from China to India

iPhones will increasingly be produced in India.
Photo of Laurenz Heymann on Unsplash

While India currently only manufactures 5% of all iPhones, Apple would like to switch half of its production to this country by 2027. The American brand would seek to reduce its dependence on China after having recently encountered difficulties of several kinds.

Heading to India and Vietnam

If it produces only 5% of iPhones so far, India could soon become the biggest production center of these famous phones in the world. Indeed, Apple would consider relocating between 45 and 50% of production in this country by 2027. That is double a previous forecast by JPMorgan (25% by 2025). Also, the manufacture of MacBooks and AirPods could also increase in Vietnam.

A previous report from Apple indicated that the American company is looking to expand its production capacities mainly in these two countries: India and Vietnam. It has a production presence in the former through Foxconn and Wistron who assemble iPhones. In the second, it has two subcontractors, Luxshare and Inventec, responsible for setting up AirPods and HomePods product lines. Apple reportedly asked its partners in December to increase their local capacity and workforce.

Relocation already effective in China

Foxconn, for example, is said to have planned to invest 500 million dollars in its Indian subsidiary in the hope of strengthening its operational capacity and remedying the current shortcomings. At the moment, India is only responsible for the production of a part of the iPhones (including the iPhone 14), but other devices could follow soon, such as the iPad.

In China, relocation would already be felt, especially at Goertek, which provides acoustic parts for AirPods. The company has begun cutting earnings estimates by 60% due to a request from Apple to halt production. The other partners have also started reducing the sail area.

US sanctions and zero covid policy in China

If Apple is gradually withdrawing from China, it is to avoid certain inconveniences in the future. The Cupertino company first fears the effects of American sanctions, taken as part of the trade war against Beijing. Indeed, Washington has imposed customs duties on certain products imported from China. Which could affect his revenue.

The company also fears the impact of Covid-19, which has been omnipresent in this country for more than three years. The government only recently lifted the lockdown temporarily. This confinement and the zero covid policy have disrupted Apple’s supply chain, in particular that of the iPhone. The group had to warn its customers that deliveries would be delayed during the holiday season.

Against abundant labor and competitive costs in India

Faced with these unpredictable events, Apple believes it is essential to dispatch its production to India. This is all the more so as the country will soon have the largest population in the world. Moreover, India has set up an attractive investment policy with, in particular, lucrative subsidies. We thus see more and more multinationals settling in this country, mainly in New Delhi (Samsung, Xiaomi, Oppo, Vivo and OnePlus).

Also, India has abundant labor resources and competitive labor costs. It therefore has as many advantages as China. But the latter remains a key market for Apple with strong sales growth, even if the relocation is launched. The apple brand, for example, recorded 36% growth there in the third quarter of 2022. It also finds quality standards in its supply chain there.

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