A new deal between Foxconn and Apple will see AirPods manufactured in India for the first time. Via Reuters, Foxconn is investing $200 million in a new factory in India that will produce Apple’s wireless earbuds, among other products.
Although AirPods manufacturing offers much lower margins than what Foxconn makes on iPhone production, the company reportedly went ahead with the deal to “reinforce engagement” with Apple. Apple specifically requested an Indian production site, as the company prioritizes diversification from China.
The China-centralized supply chain has done wonders for Apple for more than two decades, but cracks started to show around 2018. At the time, a US-China trade war threatened the imposition of tariffs and outright bans on many Apple products.
The repeated China COVID-19 lockdowns of the last couple of years have further demonstrated the weakness of Apple’s supply chain structure, with iPhone production being disrupted numerous times – with material business impact felt as recently as the last holiday quarter.
Apple has been forced to cave to Chinese demands on numerous occasions, such as the requirement to host Chinese customer iCloud data in facilities geographically located within China, and the removal of open-for-all AirDrop functionality which protestors used to communicate and fight back against the Chinese regime.
The Russian invasion of Ukraine was another warning sign, for having too much dependence on a region. In the aftermath of the war last year, Apple could easily leave the Russian market as it had relatively little business there. But if China hypothetically acted in a similar fashion, such as a widely speculated invasion of Taiwan, Apple would be put in a top spot.
A combination of these factors has reportedly seen Apple accelerate plans for supply chain diversification. This deal for AirPods production in India is one tangible result of this work.
Of course, it will take time to transition the behemoth. More than 90% of iPhone models are currently produced in Chinese factories, at a scale of tens of millions per month. Analysts expect that proportion to fall to around 75% by 2025, as production ramps up in countries like India and Vietnam.
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