Explainer: Apple’s big India bet for making iphones

At a time when Apple’s largest manufacturing base, China, is grappling with a deadly Covid-19 surge, the company is looking at alternative destinations like India to avoid a negative impact on its smartphone shipments.

apple iphone in india
A man holds an iPhone 14 as Apple Inc's new models go on sale at an Apple store. (Photo source: Reuters)

Apple betting big on India for iPhone manufacturing ties in well with the country’s efforts  to surpass its target of $300 billion worth of electronics manufacturing in the next three years. So far in FY23, Apple has contributed 50% to India’s smartphone exports. Jatin Grover takes a look at why the company sees India as a preferred manufacturing destination

Why Apple’s favouring India

At a time when Apple’s largest manufacturing base, China, is grappling with a deadly Covid-19 surge, the company is looking at alternative destinations like India to avoid a negative impact on its smartphone shipments. Currently, 90-95% of Apple products are manufactured in China. India’s share is estimated to be 5%. Going forward, China’s share will significantly come down owing to Apple’s focus on India as well as Vietnam.

Another reason for Apple favouring India is the production-linked incentive (PLI) scheme for smartphones in the country, under which its manufacturing partners are being incentivised for incremental sales and production. Apple has three contract manufacturers in India—Wistron, Foxconn, and Pegatron.

Reasons for increase in export share of iPhones

In India, Apple manufactures the iPhone 11, 12, 13, and 14 models. Among key reasons for the increase in its shipments to other countries is the rising demand for premium phones, and the iPhone has the largest market share in the segment. According to market research firm Canalys, in the October-December quarter, Apple achieved its highest quarterly global market share ever, at 25%, despite shrinking demand and manufacturing issues in Zhengzhou, China.

Further, the phone PLI is also pushing its contract manufacturers to speed up production in India. Last month, the Centre approved incentives of Rs 357.17 crore for Foxconn. Similarly, it approved Rs 350.7 crore for Wistron earlier this month. All these factors helped Apple become the first company to export about $1 billion of smartphones in December alone.

Competition for Apple in India

Apple has a market share in India of around 4%, significantly less than the likes of Samsung and Chinese players such as Xiaomi, Vivo, Oppo, OnePlus. However, in the premium segment of smartphones, it has 

the largest market share, at over 40%. With regards to exports from India, while Apple dominates, it is closely followed by Samsung. 

Going forward, Apple is targeting to expand its production in India to up to 25% from the current 5%. The company will continue to be a dominant player in the premium segment of smartphones, according to experts. With India becoming an important manufacturing hub for the company, growing demand for iPhones will also help the country achieve its export target of $120 billion worth of electronics manufacturing, and smartphones are expected to contribute about 50% to the electronics exports.

How Apple is preparing to increase manufacturing in India

The company’s contract manufacturers such as Foxconn, Pegatron, and Wistron have ramped up production of iPhones in India. Foxconn has talked about its plans to increase the workforce by 4x at its iPhone factory in India over the next two years. In Tamil Nadu, the company plans to increase its workforce to 70,000, by adding 53,000 more workers over the next two years.

Another of Apple’s contract manufacturers, Pegatron, also has a manufacturing facility in Tamil Nadu, which employs around 7,000 people at present. Interestingly, the Tata group has shown interest in acquiring the India operations of the third Indian contract manufacturer, Wistron, which currently has a manufacturing facility in Karnataka with 10,000 workers. Further, Tata has increased hiring at its Hosur plant, where it makes iPhone components. The company is expected to add manufacturing lines for iPhones going forward. Tata will also launch 100 Apple stores in the country.

At a time when the company is looking to diversify its device manufacturing away from China, such developments mean a significant upside for India, though there could be competition from Vietnam.

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First published on: 27-01-2023 at 08:28 IST
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