An illustration of the changing structure of global trade is the evolution of Apple’s production geography. Bloomberg has just published an unsourced report outlining the expansion of Indian assembly activities for the new iPhone. The report said that Apple will make “the most expensive iPhone Pro and Pro Max models in India for the first time this year, a milestone for the US company and the Asian country’s manufacturing sector”. The report continued, stating that the sub-contractor Foxconn will start assembly of these models “within weeks of their global launch” and it had already “begun training thousands of workers at its factory in southern Tamil Nadu state”. Bloomberg said that 14% of Apple’s production now originates from India.
Certainly, the shift to Indian production by the American company has been remarkably rapid. Just a few years ago Apple was notable for its reliance on China for both assembly operations but also the sourcing of components. It is unclear the degree to which Apple is still reliant on Chinese component suppliers to support its assembly operations in India.
Apple is also unusual in the degree to which it has shifted production to India. Its non-Chinese rivals have much preferred South East Asia for mobile phone assembly, with South Korean firms locating in Vietnam in particular. Therefore, it would be wrong to exaggerate the role of electronics assembly for the growth of both air and sea volumes into India. Certainly, Indian air freight volumes have grown consistently in high single digit percentages for over a year. Much of this has been driven by consumption as well as traditional industries attempting to avoid the problems in the Red Sea. However, the experience of Apple does appear to strongly confirm that India is a viable location for electronics production and therefore, possibly, for other sectors as well. As the world violently restructures its supply chains away from China, India is likely to be an attractive alternative production location.
India has already begun to improve its sea, air and land freight transport capabilities. Over the past year air freight providers in India have begun to overhaul their freight capabilities, with IndiGo introducing new freighter aircraft and AirIndia being restructured. The level of demand growth is likely to support continuing investment.
Source: Ti Insight
Author: Thomas Cullen
