Apple has tripled production of iPhones in India, accounting for nearly 7% of its total smartphone production, up from about 1% in 2021, Bloomberg reported. The news isn’t a shocker, given CEO Tim Cook called India a primary focus for Apple in February. Its Indian playbook is evolving and appears to be a counterweight for its China-centric production facilities.
iPhone production in India has been made possible by manufacturing collaborations with partners like Foxconn Technology Group and Pegatron Corp., according to sources familiar with the situation. In just a short few years, Apple has managed to shift 7% of its iPhone production to India, a move that makes sense as it must reduce its reliance on China.
Recall the Covid snafu that sent Foxconn’s “iPhone City” complex in Zhengzhou into chaos during the pandemic, which caused severe multi-month supply disruptions. Apple doesn’t want a repeat of that and will continue to ‘friendshore‘ production to other countries. India is the next big move.
“Of the total production, Apple exported $5 billion of iPhones in the year ended March 2023, nearly four times as much as the previous period,” the people said.
Bloomberg pointed out Apple is devising a plan to simultaneously produce the next generation of iPhones in India and China late in the second half of 2023 — this will be the first time it begins iPhone assembly in both countries. And if trends persist, a quarter of all iPhone manufacturing could be produced in India by 2025.
None of this should be a surprise; as we’ve pointed out, Foxconn, Apple’s biggest contractor, has invested hundreds of millions of dollars in new production facilities in India over the last several years.
Behind the scenes, Apple has also pressured suppliers to reevaluate its manufacturing supply chains of AirPods, HomePods, and MacBooks in China.
Shifting supply chains out of China has been dubbed as “friendshoring.” While that’s a play on “offshoring,” this isn’t about companies moving operations back to the US or Europe but instead seeking foreign alternatives that retain the benefit of cheap labor costs but with less international controversy.
A recent poll by the American Chamber of Commerce in Shanghai, an organization that promotes US businesses in China, said about a fifth of the 307 companies surveyed revealed a reduction in investments in the world’s second-largest economy.
The uncertainty around China started in 2018 after President Trump launched a trade war. Then supply chain snarls at manufacturing facilities during Covid spooked many multinationals with high exposure in the country. And now, rising Sino-US tensions have fueled the fire to push companies to diversify abroad.
Readers have been well aware of this trend over the last year:
Michael Every, the global strategist at Rabobank, expects India to be one of the largest beneficiaries of friendshoring.
… and, of course, Tim Cook can’t publicly announce the rejiggering of supply chains out of China as it would infuriate Beijing. So he recently praised Apple’s ‘symbiotic’ relationship with China.