About 95 per cent of iPhones are still made at one factory in Zhengzhou, China. Since 2016 relocation has accelerated, but Indian red tape and technological lag continue to play an important role. For many analysts, today's India is like China 20 years ago.
New Delhi (AsiaNews) – Hundreds of people were at the opening of Apple's second store yesterday in New Delhi. On Tuesday, the first one opened in Mumbai, India’s financial capital. On Wednesday, Apple CEO Tim Cook met with Indian Prime Minister Narendra Modi.
“We share your vision of the positive impact technology can make on India’s future – from education and developers to manufacturing and the environment, we’re committed to growing and investing across the country,” Cook tweeted afterward.
Opening two new stores in India helps Apple diversify its supply chains and production from China, part of its decoupling strategy after then US President Donald Trump launched a trade war against China, and China adopted a zero-COVID policy that slowed down global trade for months.
For some observers, India’s a huge market (1.4 billion people) and growing middle class can help Apple replicate what it did in China 20 years ago:
In India, about 44 per cent of the population is aged 18 to 25, and its minimum wages are on average a third or half those in China.
Only one Indian in two (46.5 per cent of the Indian population) has a smartphone against four in five (81.6 per cent) in the United States, generating some US$ 6 billion in revenues, less than 2 per cent of the total.
So far Indians have gone for low-cost smartphones made by China's Xiaomi or South Korea's Samsung, spending an average of US$ 224, according to estimates by the International Data Corporation (IDC), a company that analyses technology markets. This is an 18 per cent increase in spending over a year.
According to some economists, even if Apple's cheapest model now costs almost twice as much, with the average Indian income expected to rise, the demand for high-end tech products will also grow.
In late September 2022, Apple announced plans to produce part of its iPhone 14 in India. According to US bank JP Morgan, the percentage could rise from 5 to 7 per cent now to 25 per cent in 2025, or, according to other estimates, 40 to 50 per cent in 2027.
Foxconn, Apple's main assembler, has been making iPhones in Chennai (Tamil Nadu) since 2017; in late February, it announced plans to triple the number of workers to a total of 100,000 and boost output to 20 million units by 2024.
Recent reports suggest that the Taiwanese company wants to open another facility in Bengaluru (formerly Bangalore), Karnataka, with a US$ 700 million price tag and a similar number of employees.
For Prime Minister Narendra Modi and his government, Foxconn’s expansion in India would be a major boon. For many years, India has been keen to close the technology gap with China and attract Western investors who are facing increasing difficulties in Beijing for political reasons.
Experts warn, however, that moving production from China to India will not be simple nor quick.
Tim Cook himself flew to Beijing last month, a sign that China is still important; after all, it still represents 20 per cent of Apple’s annual turnover and Chinese customers buy seven times more smartphones than India’s.
Although in Western eyes, Chinese products continue to be considered of low quality, China has actually made great strides in the last 20 years, developing technological products that are difficult to replicate elsewhere.
At present, more than 95 per cent of iPhones are still produced in the Zhengzhou (called iPhone City), at a plant that employs 300,000 workers.
Recently, the Financial Times documented the difficulties Apple engineers sent from California and China encountered in India; for example, in one factory in Tamil Nadu, run by Indian conglomerate Tata, only one in two components that roll off the production line can be shipped to Foxconn for assembly.
India lacks the level of top-down government coordination that is found in China, which helped the latter develop its fast and efficient production machine. By contrast, the Indian bureaucracy is seen as a major obstacle.
Apple engineers who visited Tamil Nadu found themselves having to commute four hours daily to reach the Foxconn factory in Chennai, often with slow or no Wi-Fi connections.
The People's Daily, the newspaper of the Communist Party of China, highlighted these difficulties in an editorial that argued that decoupling will turn against the United States in the long run.
“In the case of the US increasing its high-tech blockade of China, Chinese consumers will certainly not be as loyal ‘Apple fans’ as they were in the past,” the article says.
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