It has recently been announced that consumer technology company Apple is to manufacture its latest iPhone 14 in India this year, marking a significant evolution in its production strategy with implications for its – and its competitors’ – supply chains.
Apple’s contract manufacturer, Foxconn, already has a plant based in Chennai but typically making older iPhone models with a six month time lag over global product releases. It is believed that this gap will now narrow to six weeks with a short term goal of simultaneous release of the iPhone 15 in both markets.
The move comes as the global tech giant seeks to diversify its production base from China, a market which has seen considerable disruption over the past two years due to zero-Covid lockdown policies. Tensions between the US and China – exacerbated by the recent controversy of Nancy Pelosi’s visit to Taiwan – have also called cast doubts over the longer term prospects of US high tech companies manufacturing products in China. For instance, new US legislation has allowed for the banning of the export of advanced semi-conductor chip technology to China, although at present this has not impacted the bulk of the market.
Apple competitors may follow them to India
It is believed that as well as assembly operations, Apple will use more Indian suppliers (presently many intermediate components are sourced from China) helping to develop a production eco-system and reduce input costs. This will, in turn, encourage other high tech manufacturers to the country as levels of know-how, a skilled work force, technology and transport infrastructure improve. Many competitors, such as Samsung, may also follow, keen not to lose competitive advantage in a fast growing market.
Apple’s move shows a high degree of confidence in the Indian market both as a design and production hub as well as a consumer market. It also forms part of an industry-wide trend of increasing resilience through ‘optionalization’ or ‘China+’ supply chain strategies. It is not clear what proportion, if any, of Apple’s iPhones will be exported to the global market. However, it certainly gives the company more options should manufacturing in China become more difficult or, indeed, impossible.
Source: Transport Intelligence, 6th September 2022
Author: John Manners-Bell