India helps Apple hedge its iPhone risk in China
Tech analyst Ming-Chi Koo’s Twitter comments underscore India’s emergence as the world’s next big workshop.
The famous Apple watcher wrote:
My latest survey indicates that Foxconn’s iPhone production site in India will ship the new iPhone 14 6.1″ almost simultaneously with China for the first time in 2:22 (India being a quarter or more behind in the past).
In the short term, India’s iPhone capacities/shipments still have a huge gap with China, but this is an important step for Apple in building a non-Chinese iPhone production site.
This implies that Apple is trying to reduce geopolitical impacts on supply and sees the Indian market as the next key growth driver.
Koo works for TF International Securities in Hong Kong. Let’s put his words in context.
Apple’s iPhones were first assembled in India in 2017. After a slow start, market research reports indicate that production nearly tripled in 2021 and grew by around 50% year-on-year in the first quarter 2022 to reach nearly one million units.
It’s impressive, but Apple sold 56 million iPhones worldwide in the quarter. For now, units assembled in India are those intended for sale in India.
But that leaves a lot of room for growth. In the first quarter, a total of 38 million cellphones were sold in India, giving Apple a market share per unit of around 3%, nearly double what was sold in China, where Apple held 18% of the market.
The Indian government is on Apple’s side. Electronics are key to “Make in India”, the comprehensive industrialization program announced by Prime Minister Narendra Modi in 2014.
The first company to manufacture iPhones in India was Wistron, but newer models have gone to Foxconn (Hon Hai Precision Industry Co Ltd) and since April this year to Pegatron, a Taiwanese electronics manufacturing company which mainly develops computing, communications and consumer products. electronics for branded suppliers.
The Wistron plant was temporarily shut down last December when unpaid workers went on a rampage, causing millions of dollars in damage.
Foxconn, Pegatron and Wistron – all based in Taiwan – have long been Apple’s main contract manufacturers. Foxconn and Pegatron assemble the most iPhones: around 60% and 30%, respectively, according to market research estimates. But it looks like they will soon have more competition.
Chinese company Luxshare Precision Industry is reportedly building a large new factory in Kunshan that is expected to more than double its annual iPhone assembly capacity to 15 million units, or about 7.5% of total output of iPhone.
Luxshare Precision, a manufacturer of cables and connectors for consumer, automotive, IT and other applications, purchased its existing iPhone assembly facilities from Wistron in 2020. In 2021, it won orders for the iPhone 13 pro.
Luxshare is headquartered in Dongguan, Guangdong, China. Kunshan is located between Shanghai and Suzhou. Its ambitions will probably not stop at the Kunshan factory.
Taiwanese can be more than a little bored. In mid-July, New Taipei City prosecutors accused Luxshare Precision of stealing intellectual property and poaching talent from a Taiwanese company in order to get more orders from Apple.
At this point, it cannot be said that iPhone assembly is moving from China to India. On the contrary, India is emerging as a potentially very large market that is likely to be served primarily, if not entirely, by local assembly operations. At the same time, China is hijacking Taiwan’s assembly activities.
And remember that, for the most part, assembled in India does not mean made in India. As Asia Times reported in “Apple still won’t back down from Chinese hawks in the United States,” the most recent Apple supplier list shows 51 of the company’s top 200 suppliers based in China, 48 in Taiwan, 34 in Japan and 32 in the United States. Of the rest, only nine are in India.
The policy has made reliance on China a problem for Taiwanese contractors and their customers. On August 5, it was reported that shipments from Taiwan to Pegatron’s factories in China were under close scrutiny from Chinese customs officials after the company’s vice president met with Nancy Pelosi, president of the United States House of Representatives.
Earlier in the year, China’s “zero-Covid” policy forced Pegatron to suspend operations in Shanghai and Kunshan. Foxconn was also affected.
Pegatron is now focusing its expansion on Indonesia, Vietnam, Mexico and India. It is also present in Australia, the Czech Republic, Japan, South Korea, Singapore and the United States.
Foxconn, the world’s largest electronics contractor, does most of its work in China, but its expansion plans now focus on Vietnam and India. It is also present in Malaysia, Hungary, Slovakia, the Czech Republic, Brazil, Mexico and the United States.
Of all these markets, India has the most untapped growth potential.
In 2015, following a visit to India by its founder and CEO Terry Gou, Foxconn announced, “We have big plans for India and we see huge potential in the country. This includes plans to establish 10-12 manufacturing plants in the country by 2020, which would generate around 1 million job opportunities.
It hasn’t happened yet, but it could happen in the next decade.
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