June 16, 2024

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Apple India iPhone production surges to $7 billion in Chinese shift

Apple India iPhone production surges to $7 billion in Chinese shift

(Bloomberg) — Apple Inc. More than $7 billion worth of iPhones sold in India in the last fiscal year, tripling production in the world’s fastest-growing smartphone business after accelerating the move outside of China.

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The US company now makes roughly 7% of its iPhones in India by expanding partners from Foxconn Technology Group to Pegatron Corp. , said people familiar with the matter. This is a big jump for India, which accounted for an estimated 1% of the world’s iPhones in 2021.

Apple is exploring ways to reduce its dependence on China as tensions between Washington and Beijing continue to escalate. The people, who declined to be named because the information is not public, said its longtime partners, which make most of the world’s iPhones from sprawling factories in China, have added assembly lines at a rapid pace over the past year.

The world’s most valuable company last year suffered chaos at Foxconn’s flagship “iPhone City” complex in Zhengzhou, which exposed vulnerabilities in Apple’s supply chain and forced it to cut production estimates. At the same time, Indian Prime Minister Narendra Modi has introduced a package of incentives to boost domestic manufacturing.

Shares of Apple were up 1.1% at 9:31 am in New York.

Of total production, Apple shipped $5 billion in iPhones in the year ending March 2023, nearly four times the previous period, the people said. It’s possible that Apple will try to manufacture its next iPhones in India at the same time as in China, sometime in the fall of 2023. If that’s the case, this would be the first time that iPhone assembly begins at the same time in the two countries. And if the massive expansion of its suppliers continues, Apple could assemble a quarter of all its iPhones in India by 2025. Representatives for the US company declined to comment.

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Even before the iPhone city exploded last year, Apple recognized the need to diversify its supply chain. It successfully lobbied for incentives in India and pushed suppliers Foxconn and Wistron Corp. and Pegatron to ramp up locally. The trio, who together employ around 60,000 workers in India, manufacture models ranging from the old iPhone 11 to the latest iPhone 14 in the country.

This helped put Apple at the center of India’s ambitions to become a major manufacturing center and an alternative location to China. Apple is among the most demanding companies in the world when it comes to manufacturing: its production chain includes hundreds of companies worldwide and employs millions, many of which are currently located in China.

The migration of iPhone production represents an economic victory for India that could have implications for how other American brands plan their future. For Apple, the country itself represents a wellspring of future growth, at a time when China’s economy is tanking after years of punishing Covid Zero restrictions.

Apple will open its first two retail stores in India next week, one in the financial hub of Mumbai and the other in the capital, New Delhi. And CEO Tim Cook is set to fly on the plane to open two stores in person, underlining the growing importance of the local market.

The Cupertino, California-based Apple company has also sought changes to Indian labor laws as part of its efforts to expand domestic production and set up large factories.

Foxconn, the largest contract manufacturer, plans to invest about $700 million in a plant in a southern state to make phone components and possibly iPhones. Representatives for Foxconn, Wistron and Pegatron did not immediately respond to requests for comment.

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What Bloomberg Intelligence says

Reducing exposure to China’s dominance in a technology supply chain that has been built up over decades will face significant challenges, but our analysis suggests that dependence can be reduced by 20-40% in most cases by 2030. While geopolitical tensions as well as government and corporate policies are spurring moves Emerging to geographical diversification, it will take years of investment to significantly decouple from China’s complex, efficient and skilled supply chain from semiconductors to devices to assembly.

Stephen Tseng and Woo Jin-ho, analysts

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— with assistance from Mark Gorman and Debbie Wu.

(Updates with posts in the fifth paragraph.)

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