Hours after Foxconn’s representative in India divulged plans to double the size of its business in the country, chair Liu Young added that, barring major changes in future, the south Asian nation will become a new manufacturing centre for the world.
Liu noted it took more than 30 years to build a supply chain in China and will take time to transfer a similar system to India. However, because of the contract manufacturer’s experience in the mainland, the company expects it will take relatively less time to build up the ecosystem in India.
“There are huge opportunities for the local electronics industry to develop,” he suggested.
Liu’s comments were supported by Van Eck Associates’ chief economist for emerging markets Natalia Gurushina, who recently noted India will be a rising star for years to come due to its successful structural changes, Bloomberg reported.
With rising uncertainties driven by geo-political tensions, Apple and Foxconn are diversifying production geographically, while capitalising on a growing labour market in India, where wages are substantially lower compared with China and Vietnam, Canalys analyst Sanyam Chaurasia told Mobile World Live (MWL).
He said the goal is to ensure they are not completely reliant on one particular market like they were on China. “Now that they have China, India and Vietnam, if one market faces a challenge, the others can compensate for it.”
iPhone assembly, for example, is moving to India, while Mac and iPad production is going to Vietnam.
Last year, following strict Covid-19 restrictions and protests at Foxconn’s largest facility in China, Apple asked suppliers to shift production away from China, establishing India as a major manufacturing hub.
Chaurasia acknowledged there are lots of challenges in the move, noting the government is not always flexible in how policy is determined, creating challenges in terms of approvals.
“Chinese suppliers are still somewhat sceptical about investing in India,” he stated.
Many regions have unstable power supplies; labour costs are low but staff need significant training. “Each of these things may be small but add up to become a larger problem for investors.”
With Apple recently shifting some assembly of its latest iPhone 15 line-up to India, Opensignal VP of analysis Ian Fogg told MWL the move indicates the smartphone giant is becoming more serious about diversifying its iPhone production.
Moving beyond making only older and simpler iPhone models, Fogg noted newer releases sporting more advanced connectivity, cameras, displays, case designs and other features are harder to make.
Shifting significant amounts of iPhone production outside of China, however, is a years-long process because of the ongoing dependence on local component suppliers that feed the assembly of the devices, he said.
A lack of access to key components as well as materials, including rare earth metals, will limit how quickly Apple’s contract partners can ramp up production.
The vast majority of Apple’s nearly 200 suppliers operate in China, with only about a dozen set up in India, The Wall Street Journal reported earlier in the year.
To begin to alleviate its dependence on imports from China, Foxconn in August was tipped to invest $500 million in two component factories in the state of Karnatakam.
Foxconn’s operations in India certainly have a long way to go to catch up with China. Its largest iPhone facility in Zhengzhou, the capital of east-central Henan province, makes about half of Apple’s total output. The facility, dubbed iPhone city, covers an area of 5.6 square km and employed as many as 350,000 workers running 94 production lines at its peak.
It’s important to remember India is the world’s second-largest smartphone market, with a growing appetite for premium models, which means Apple will need to boost output just to keep up with surging local demand.
Chaurasia said with consumer disposable income growing, people are willing to spend more on devices, noting that is different than five years ago, aided by the introduction of more attractive financing schemes.
Canalys Q2 data showed the iPhone had a 66 per cent share of the over $500 segment in India, and 4 per cent of the overall market, up from 3 per cent a year earlier, after booking 45 per cent year-on-year growth to 1.4 million units.
The jump was supported by Apple opening two official retail outlets in the quarter.
Foxconn is not alone in its aggressive shift to India.
Xiaomi supplier Dixon Technologies India is building a near 28,000-square-metre smartphone factory in a suburb of Delhi, with plans to invest some IND4 billion ($48.2 million) over three years, Bloomberg reported.
China-based handset makers operated more than 200 factories in India in 2021, Yicai Global wrote earlier in the week.
In June, Google held talks with several suppliers about moving assembly of some Pixel devices to India, Bloomberg stated.
Apple and Foxconn are in the earlier stage of the journey. The US-based company started manufacturing iPhones via its contract manufacturing partners in India in 2017.
Chaurasia forecasts the country will account for 22 per cent to 25 per cent of total iPhone production in 2025. That’s more than a threefold increase from the 7 per cent level reached at end-March.
He highlighted consumers spending $1,000 on a device is not uncommon in India now. “Apple products are compelling for consumers and have an aspirational value, with its fan base pretty much the same as in global markets.”
Rising domestic demand, estimated by Canalys to reach 7.3 million units in 2023 (up from about 4.5 million the previous year), alone should keep Foxconn’s local factories in India humming at a brisk pace as the country gears up to become a global tech manufacturing hub.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.