Is the iPhone’s ‘Made in India’ era about to begin?

Feb 11, 2023, 8:00 AM
New iPhone 14 models are pictured here on display at an Apple event on the campus of Apple's headqu...
New iPhone 14 models are pictured here on display at an Apple event on the campus of Apple's headquarters in Cupertino, California, in September of 2022. Photo credit: Jeff Chiu/AP

  (CNN) — As Apple looks beyond China to secure crucial supply chains strained by Covid lockdowns and threatened by rising geopolitical tension, India has emerged as an attractive potential alternative to the world’s second largest economy.

And Beijing’s big regional rival isn’t missing a beat in talking up the opportunity. One of India’s top ministers said last month the California-based company wants to ramp up its production in the South Asian country to a quarter of its overall total.

Minister of Commerce and Industry Piyush Goyal said Apple was already making between 5% and 7% of its products in India. “If I am not mistaken, they are targeting to go up to 25% of their manufacturing,” he said at an event in January.

His comments come at a time when Foxconn, a top Apple supplier, is looking to expand its operations in India after suffering severe supply disruptions in China.

For years, Apple had relied on a vast manufacturing network in China to mass produce iPhones, iPads and other popular products. But its dependence on the country was tested last year by Beijing’s strict zero-Covid strategy, which was rapidly dismantled last December.

Since the middle of last year, Apple has redoubled its efforts to invest in India. But can Asia’s third largest economy deliver?

“Theoretically, it can be done, but it won’t be happening overnight,” said Tarun Pathak, a research director at market research firm Counterpoint.

“[Apple’s] dependency on China is a result of almost two and a half decades of what China put in to develop their entire electronics manufacturing ecosystem,” Pathak said, adding that the company makes nearly 95% of its phones in China.

Apple did not respond to requests for comment from CNN.

China headaches mount

But the world’s most valuable company posted shockingly weak earnings this month, partly because of its recent problems in China. The troubles started in October, when workers began fleeing the world’s biggest iPhone factory, run by Foxconn, over a Covid outbreak.

Short on staff, Foxconn offered bonuses to workers to return. But violent protests broke out in November, when newly-hired staff said management had reneged on their promises. Workers clashed with security officers, before the company eventually offered them cash to quit and leave the site.

While operations at the sprawling campus in Zhengzhou, central China, have now returned to normal, the supply problems hit the supply of iPhone 14 Pro and iPhone 14 Pro Max models during the key holiday shopping season.

Foxconn did not respond to a request for comment.

On top of that, US-China relations are looking increasingly tense. Last year, the Biden administration banned Chinese companies from buying advanced chips and chipmaking equipment without a license.

“I think they will continue to depend on China for a significant proportion of their production,” said Willy Shih, a professor at Harvard Business School, referring to Apple.

“But what they are trying to do, and I think it makes sense, is to add diversity to their supply base so that if something goes wrong in China, they will have some alternatives.”

Shih referred to this strategy as “China +1 or China+ more than one.”

China+1= India?

“India is a hugely exciting market for us and a major focus,” Apple CEO Tim Cook said on a recent earnings call.

“Looking at the business in India, we set a quarterly revenue record and grew very strong double digits year over year and so we feel very good about how we performed,” he said.

India is set to overtake China this year to become the world’s most populous country. The country’s massive and cheap labor force, which includes workers with key technical skills, is a big draw for manufacturers.

Asia’s third largest economy also offers a growing domestic market. In 2023, as global recession fears persist, India is expected to remain the fastest growing major economy in the world.

If it can sustain that momentum, India could become only the third country with GDP worth $10 trillion by 2035, according to the Centre for Economics and Business Research.

Analysts say India’s growing consumer base might give it an edge over Vietnam, which has also been attracting greater investment in electronics manufacturing.

The Indian government has rolled out policies to attract investments in mobile phone manufacturing. According to Counterpoint’s Pathak, India accounts for 16% of the global smartphone production, while China constitutes 70%.

There are some success stories: Samsung, the world’s top selling smartphone brand, is one step ahead of Apple and already makes a lot of its phones in India.

The South Korean giant has been diversifying away from China because of rising labor costs and also stiff local competition from homegrown players such as Huawei, Oppo, Vivo and Xiaomi.

It now makes the bulk of its phones in Vietnam and India, with the latter accounting for 20% of Samsung’s global production.

In 2018, Samsung opened what it called “the world’s largest mobile factory” in Noida, a city near New Delhi, and analysts say the the company may have paved the way for other manufacturers.

Apple devices are manufactured in India by Taiwan’s Foxconn, Wistron and Pegatron. Until recently, the company would typically start assembling models in the country only seven to eight months after launch. That changed last year, when Apple started making new iPhone 14 devices in India weeks after they went on sale.

Some of Apple’s biggest contractors are already pumping more money into India. Last year, Foxconn announced it had invested half a billion dollars in its Indian subsidiary.

Earlier this week, the government of the southern Indian state of Karnataka said it is “in serious discussion of investment plans” with the Taiwanese giant. Foxconn already has factories in the Andhra Pradesh and Tamil Nadu.

Where is India’s Shenzhen?

Manufacturing in India, however, comes with myriad challenges. It constitute only 14% of India’s GDP, according to the World Bank, and the government has struggled to grow that figure.

“One of the things that China did is they built infrastructure when they could. And I would argue that India did not build infrastructure when they could,” said Shih, referring to highways, ports and transport links that allow easy movement of goods.

Apple will also face a lot more red tape in India if it wants to create sprawling Chinese-style campuses.

“Will India be able to replicate a Shenzhen version?” asked Pathak, referring to China’s manufacturing hub. Building such “hotspots” won’t be easy and would require India to think about issues ranging from logistics and infrastructure to the availability of workers, he added.

Experts told CNN that accessing land in a chaotic democracy like India could be a challenge, while the Chinese Communist Party faces fewer barriers to expropriating real estate quickly for causes it deems important.

India would also have to think about moving beyond simply assembling iPhones through favorable government policies.

“You need to source components locally, which means you need to attract many more companies in the supply chain to set up shop in India,” Pathak said.

Some of the biggest businesses in India may be stepping up. According to Bloomberg, autos-to-airline conglomerate Tata Group is in talks with Wistron to take over the Taiwanese company’s factory in southern India.

Tata and Wistron did not respond to request for comment.

“I am not directly involved in that, but it should be really good for India because this is going to create an opportunity in India to manufacture electronics and microelectronics,” N. Ganapathy Subramaniam, COO of Tata Consultancy Services, the group’s software services arm, told Bloomberg.

While there are significant obstacles in India’s ambition to deepen its relationship with Apple, doing so would be a huge boost for the country and Prime Minister Narendra Modi.

‘I think it’ll be [a] big, big win,” said Pathak, noting that growing manufacturing ties with a US giant like Apple will in turn attract other global players in the electronics manufacturing ecosystem to India. “You focus on the big one, the others will follow.”

— Catherine Thorbecke and Juliana Liu contributed reporting.

We want to hear from you.

Have a story idea or tip? Send it to the KSL NewsRadio team here.

Today’s Top Stories

Business + Economy

child labor...
Elizabeth Weiler

U.S. Department of Labor says Sodalicious violated child labor laws

SALT LAKE CITY — Four different locations of Utah soda and dessert shop Sodalicious went against federal child labor laws, according to the U.S. Department of Labor. By employing 19 minors and having them work long, non-permitted hours, the USDL found Sodalicious in violation.  Sodalicious‘ founding members are Annie and Kevin Auernig with 25 different […]
23 hours ago
Are tech companies moving too fast in rolling out powerful artificial intelligence technology that ...
MATT O'BRIEN AP Technology Writer

Musk, scientists call for halt to AI race sparked by ChatGPT

Their petition is a response to San Francisco startup OpenAI's recent release of GPT-4, a more advanced successor to its widely-used AI chatbot ChatGPT.
23 hours ago
wholesale inflation utah interest rates...
Mark Jones

The impact inflation is having on younger Americans

What kind of impact is inflation having on younger Americans? Dave & Dujanovic talked to a reporter from to discuss the matter.
2 days ago
Multiple dollar bills are pictured, social security will see a bump...
Mark Jones

How to talk to your spouse about finances? An expert weighs in.

Dave and Dujanovic discuss how we can discuss finances with our spouse.
3 days ago
More stores now offer customers the option to tip, from coffee shops to ice cream stores. Around 48...
Nathaniel Meyersohn, CNN

Americans facing a radically different tipping culture

People are tipping less of inflation, and they are also overwhelmed with the number of places that give them the option to tip with a card
3 days ago
mortgage rates...
Anna Bahney, CNN

What the banking crisis means for mortgage rates

When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow.
5 days ago

Sponsored Articles

Cheerful young woman writing an assignment while sitting at desk between two classmates during clas...
BYU EMBA at the Marriott School of Business

Hear it Firsthand: 6 Students Share Their Executive MBA Experience at BYU’s Marriott School of Business

The Executive MBA program at BYU offers great opportunities. Hear experiences straight from students enrolled in the program.
Skier being towed by a rider on a horse. Skijoring....
Bear Lake Convention and Visitors Bureau

Looking for a new winter activity? Try skijoring in Bear Lake

Skijoring is when someone on skis is pulled by a horse, dog, animal, or motor vehicle. The driver leads the skiers through an obstacle course over jumps, hoops, and gates.
Banner with Cervical Cancer Awareness Realistic Ribbon...
Intermountain Health

Five common causes of Cervical Cancer – and what you can do to lower your risk

January is National Cervical Cancer Awareness month and cancer experts at Intermountain Health are working to educate women about cervical cancer.
Kid holding a cisco fish at winterfest...
Bear Lake Convention and Visitors Bureau

Get ready for fun at the 2023 Bear Lake Monster Winterfest

The Bear Lake Monster Winterfest is an annual weekend event jam-packed full of fun activities the whole family can enjoy.
happy friends with sparklers at christmas dinner...

15 easy Christmas dinner ideas

We’ve scoured the web for you and narrowed down a few of our favorite Christmas dinner ideas to make your planning easy.
Spicy Homemade Loaded Taters Tots...

5 Game Day Snacks for the Whole Family (with recipes!)

Try these game day snacks to make watching football at home with your family feel like a special occasion. 
Is the iPhone’s ‘Made in India’ era about to begin?