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It is difficult for India to take on the important task of manufacturing. After all, Apple cannot do without Made in China

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2024-07-26 06:56:03971browse

In recent years, Apple has been actively promoting the diversification of its supply chain, trying to transfer part of the production of iPhone and iPad to India, aiming to reduce costs and spread risks. However, according to Taiwanese media reports on July 23, Apple’s production layout in India has not been smooth sailing, but has encountered considerable challenges. Now, Apple is transferring some of its iPhone production capacity back to China.

印度制造难担重任 苹果终归是离不开Made in China

1. Apple has high hopes for manufacturing in India

Apple once had high hopes for manufacturing in India. Bloomberg reported earlier that Foxconn’s factories in India followed closely behind mainland China in supplying the iPhone 15 series of mobile phones to the global market almost simultaneously, highlighting the close integration of the production cycles of the two places. The Indian government and industry are full of expectations for this, and have even publicly declared that they will increase output value fivefold in the next five years, striving to become one of Apple's important production bases.

  1. The reality gap cannot be ignored

However, the gap between ideals and reality cannot be ignored. According to reports, Apple has made adjustments this year and reallocated some of its iPhone 16 production capacity to OEMs in mainland China. Companies such as BYD and Luxshare Precision have become Apple’s latest partners to participate in the production of the new iPhone. This change shows that although Apple continues to pursue the globalization and diversification of its supply chain, when faced with the challenges of production complexity and quality control, mainland China's mature industrial chain still has irreplaceable advantages.

  1. Made in India: Opportunities and challenges coexist

As the world's most populous country, India has a huge cheap labor resource, which provides a natural advantage for the consumer electronics manufacturing industry, which is quite similar to China 20 years ago. At the same time, a population of more than 1.4 billion not only means a rich labor force, but also breeds a huge potential market. However, India faces both opportunities and challenges on the road to developing consumer electronics manufacturing.

  1. Overview of the Indian smartphone market

According to market research firm Canalys, in the second quarter of 2024, despite facing multiple factors such as sluggish seasonal demand and extreme weather, the Indian smartphone market still achieved a slight growth of 1% growth, with total shipments reaching 36.4 million units. Xiaomi, vivo, Samsung, realme and OPPO occupy the top market share, while Apple, although it is the world's leading brand, fails to rank among the top five.

印度制造难担重任 苹果终归是离不开Made in China

1. Apple increases manufacturing efforts in India

Apple CEO Tim Cook plans to increase the proportion of Indian manufacturing in iPhone production, aiming to reduce risks and costs while stimulating sales of Apple mobile phones in the Indian market.

  1. The Indian market has huge potential

In the second quarter of 2024, Apple’s annual sales in India hit a record high, reaching nearly US$8 billion, a year-on-year increase of 33%. However, among the approximately 690 million active smartphones in India, the iPhone’s share is only about 3.5%, showing that Apple’s penetration rate in the Indian market still has huge room for improvement.

  1. The grand blueprint for manufacturing in India

Since 2022, news has spread in the market that Apple suppliers plan to produce more than 50 million iPhones in India every year in the next few years, and intend to produce tens of millions more Ministry, aiming to make India account for more than a quarter of global iPhone production. Foxconn plans to build a new factory in southern India with the goal of producing 20 million iPhones per year and creating 50,000 jobs.

  1. Challenges of Made in India

Despite the grand blueprint, the actual performance of Made in India is still far from expectations, exposing hidden concerns in supply chain, quality and production efficiency.

  1. Mild, Severe and India

Since at least 2023, Indian factories have encountered a series of challenges when assembling iPhone 15, including product quality failing to meet Apple’s high standards, resulting in a large number of orders being returned , forcing Apple to take price cuts to digest this batch of substandard products. This incident prompted Cook to go to mainland China to re-examine the supply chain to ensure product quality and production efficiency.

印度制造难担重任 苹果终归是离不开Made in China

1. India’s attempts to serve as a destination for Apple production capacity transfer face multiple obstacles.
  1. Although Indian factories are only responsible for about 10% of iPhone 15 OEM production, the fragility of the supply chain is fully exposed.
  2. Indian factories are highly dependent on parts and components imported from mainland China, which affects production efficiency and product quality.
  3. Low OEM yield rates and hygiene management issues threaten iPhone product quality and affect sales performance.
  4. The business environment in India has brought uncertainty to Apple, and Chinese brands such as Xiaomi and vivo have suffered high fines or frozen funds.
  5. In contrast, China provides a more friendly policy environment to support the operations of overseas technology companies.
  6. Apple is highly dependent on China’s supply chain and it will be difficult to completely get rid of it in the short term.

    印度制造难担重任 苹果终归是离不开Made in China

    India, Vietnam and other emerging markets

Although emerging markets such as India and Vietnam have the advantage of cheap labor, they lack a mature and complete consumer electronics manufacturing ecosystem. There are deficiencies in comprehensive industrial chain support and mature market mechanisms. This means that although labor costs are low, the overall production cost may not be significantly reduced, and may even be outweighed by inefficiency and quality issues.

Apple faces challenges in the Chinese market

At the same time, Apple is facing fierce competition in the Chinese market. In the second half of 2023, the strong rise of domestic high-end mobile phone brands such as Huawei Mate 60 series and Xiaomi 15 series has posed an unprecedented challenge to Apple and eroded its share in the Chinese market. Coupled with the uncertainty and quality doubts caused by manufacturing in India, Apple's performance in the Chinese market has been significantly affected. Against this background, Apple has chosen to refocus on the Chinese market and return some of its production capacity to China in order to stabilize its market position, although this move may have a limited effect on boosting consumer confidence.

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