Apple rolling out its ‘Made in India’ iPhone 14 less than a month after it launched globally is definitely kudos to the government’s production-related incentive program (PLI) to encourage local production and export of mobile phones. . While this plan aimed to boost domestic production, it also aimed to incentivize foreign companies to reduce their exposure to the dragon at a time of disrupted supply chains due to Covid-19 and worsening tensions between the US and China. While Apple still relies heavily on suppliers in mainland China for its best-selling products — the 2021 supplier list shows it accounts for 156 of its 615 manufacturing facilities — it is shifting some of its production to countries like India. The iPhone 14 will be assembled by preferred Taiwanese contract manufacturer Foxconn from its factory on the outskirts of Chennai. The other two preferred contract manufacturers are also Taiwanese, Pegatron and Wistron, which have production facilities in Tamil Nadu and Karnataka respectively. All these companies use the PLI scheme and since 2017 they have assembled the iPhone SE, iPhone 12, iPhone 13 and now the iPhone 14. Foxconn has already started shipping the iPhone 14 (last Friday), and the larger iPhone 14 Plus will be shipped by Pegatron and Wistron in late October, according to the Financial Times.
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While Apple offers huge opportunities to deepen its presence in India, there are also formidable challenges, such as its heavy reliance on component imports. China is a much bigger player than Apple in the country’s smartphone market, and all these players assemble their products here with imported parts, exacerbating India’s trade deficit. It is true that mobile phone exports have risen since the PLI scheme was introduced since 2019, but so have imports.
As of July this fiscal year, the country’s trade deficit in telephones, mobile phones and related equipment was $1.6 billion. In FY 21, it was $6.9 billion. While faster export growth will reduce this imbalance, a much better outcome will be to build a component base so that more domestic value addition occurs. The reason for optimism in this regard is the big gamble the steel-to-software Tata Group is making in electronics, including manufacturing components for iPhones at a factory near Hosur in Tamil Nadu. This facility is expected to be fully operational in four months. The Tatas also have a joint venture with Wistron, which is all good for the country’s ambitions to be part of the iPhone supply chain.
Since Apple is expected to move 5% of its iPhone 14 production to India by the end of 2022, there is reason to temper expectations that India will produce one in four iPhones worldwide, or that one in four Apple produced, according to JP Morgan. devices outside of China will be made in India by 2025. To be an automatic choice in this regard, India will need to be more competitive against Asian rivals with a manufacturing ecosystem, better infrastructure, and land and labor reforms. Some foreign companies that have chosen to leave China have preferred the fast-growing Vietnam, which has steadily built up its competitiveness over the past 15 years. Most foreign investors such as Apple are also in no rush to leave China. But the locally assembled iPhone 14 in India is certainly good news.