A new report suggests that up to half of all iPhones could be made in India by 2027, following earlier estimates of 25% by 2025.
The Chinese report says that local suppliers are already feeling the effects of Apple’s efforts to move production out of the country, with Vietnam also benefiting from the Cupertino company’s plan to reduce its reliance on China …
Background
We’ve been warning for many years about both the need and the difficulty of reducing Apple’s dependence on China, but the pandemic made even clearer the risks of the company having most of its manufacturing eggs in one basket. Recent COVID-19-related disruption at the world’s biggest iPhone assembly plant was estimated to have cost the company a billion dollars per week.
India has now established itself as Apple’s second-largest iPhone production center. Apple was hoping to hit a crucial milestone last year, with iPhone 14 assembly beginning simultaneously in both China and India. In the end, it didn’t quite manage this, but iPhone 14 production in India did kick off in September. Simultaneous production is expected for this year’s iPhone 15 lineup.
A report last year suggested that a quarter of all iPhones could be made in India by 2025, and today’s report indicates that the transition won’t end there.
Half of all iPhones could be made in India
Bloomberg research shows that, currently, just 2.27% of Apple’s supplier facilities are located in India, putting it in 8th place behind the US, China, Japan, Germany, the UK, Taiwan, France, and South Korea. But the pace of change is already significant.
The South China Morning Post (SCMP) reports on the analyst forecast.
India may produce one in two of the world’s iPhones by 2027, compared with the current state of less than 5 per cent, according to a forecast last week by Luke Lin, an analyst at the research unit of Taiwan’s DigiTimes newspaper.
The forecast is more aggressive than JPMorgan’s earlier prediction that India would assemble 25 per cent of total iPhones worldwide by 2025, but is in line with the rapid surge in India’s share of iPhone deliveries.
India’s iPhone shipments doubled from April to December 2022, from the same period in 2021. Vietnam’s share of making Apple’s MacBooks and AirPods is also expected to rise as contractors, including Chinese ones, rushed there to set up plants.
Chinese suppliers already feeling the effects
Apple has frequently cautioned against reading too much into supply chain reports. They are not always accurate, and Apple’s policy of having multiple suppliers wherever possible means that even a confirmed change in orders for one company may be cancelled out by a balancing change in orders for another.
That said, there are some indications of the effects of Apple’s ongoing work on shifting production out of China.
Goertek, which has been making acoustic parts for Apple’s AirPod earbuds and other devices in eastern China’s Shandong province for two years, is another example. The Shenzhen-listed company slashed its 2022 earnings estimate by 60 per cent, citing a request by a “major overseas client” to halt the production of a smart acoustic device. Even though the company did not name the client, analysts including Kuo have pegged the device as Apple’s AirPods Pro.
One consultant said that a potential challenge was maintaining quality standards in a more diverse supply chain. Apple has historically worked incredibly closely with Chinese suppliers to hit quality standards.
“A key question will be how long the Indian suppliers … can ramp up to meet these standards”, said UK-based supply chain consultant Alan Day. “Apple has worked with, or developed their Chinese suppliers for years and this will not be achieved overnight. Taking this ‘driver for perfection’ catalyst out of the market may lead to standards slipping within the supply chain.”
This concern may be exaggerated given that a lot of Apple’s production outside of China is with the same Taiwanese or Chinese companies.
Photo by Screen Post/Unsplash
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