The Apple iPhone story in India is progressing at a rapid pace. Exports have crossed the $1 billion in the five months since April, there’s been a quick turnaround in manufacturing of different variants of the latest iPhone 14, new joint ventures (JVs) are being set up between domestic and international chip manufacturers, and brokerage firms have put out glowing commentaries.
A Bloomberg report suggests that at the current rate, outbound shipments of India-made iPhones, particularly to Europe and the Middle East, will be worth $2.5 billion in the 12 months to March 2023. This means the net value of the iPhones produced locally will double from $1.3 billion through March 2022.
India looks poised for rapid progress in the highly monopolised market of iPhone manufacturing, but can it leapfrog China and become the most-preferred partner of the Cupertino tech giant?
The answer lies in the data: According to recent estimates from Bloomberg Intelligence, it will take about eight years to move just 10% of Apple’s production capacity out of China, where roughly 98% of the company’s iPhones have been made.
Further, the difference between the number of iPhones manufactured in India and China is still huge. Last year, India manufactured about three million iPhones, whereas China produced a mammoth 230 million.
The reason why China is miles ahead of India at this point is that it has a well-oiled ecosystem of local component suppliers, modern and efficient transport, communication, and electricity supply, all of which have been tried and tested by Apple.
So on the face of it, Apple contemplating a complete overhauling of such an ecosystem seems highly unlikely.
India picking up the pace
A recent commentary from Moody, which lauded – albeit subtly – Apple’s Indian manufacturing capabilities, has raised hopes and strengthened belief in India’s abilities.
“Apple’s plan to manufacture iPhone 14 products in India is credit positive because it will diversify its manufacturing base that is highly concentrated in China,” said Raj Joshi, senior vice president, corporate finance group, Moody’s.
In its commentary, Moody’s wrote that Apple has produced iPhones in India since 2017, but the local manufacturing of iPhone 14 models within weeks of their global launch demonstrates the maturity of the company’s manufacturing capabilities in India, which are expected to ramp up quickly.
This maturity also stems from developments in the Indian smartphone manufacturing industry and chip production.
Recently, Vedanta announced it would set up a hub to manufacture iPhones and television equipment in Maharashtra. The mining giant will hold a 60% stake in the joint venture while Taiwanese chip maker Foxconn will own the remaining 40%.
The race to manufacture iPhones is also heating up, with the Tata Group entering the fray. The conglomerate is in discussions with Taiwanese electronics giant Wistron to set up a JV.
The government, too, is trying hard to boost India’s nascent yet promising semiconductor industry. We recently reported that the Indian government is aiming for a larger share of the global pie as the demand for semiconductor chips – touted as the “new oil” – gathers momentum.
In retaliation, the Joe-Biden administration passed the CHIPS and Science Act of 2022, and approved a $52.7 billion budget for semiconductor manufacturing and research and a 25% investment tax credit for chip plants that’s estimated to be worth $24 billion. This credit applies to projects that start construction after January 1, 2023.
The US government has also ordered chip designers Nvidia Corp and AMD to stop exporting two top computing chips for artificial intelligence work to China in the interest of national security.
As relations between the two countries continue to sour, and with India warming to the US, the country’s ambitions to become an iPhone manufacturing hub and a leader in semiconductors could get a timely boost.
But, as the data shows, India has a long way to go before it can rival China’s iPhone manufacturing chops.