One of the main bear cases for Apple is its close ties with China, especially on the manufacturing front. According to Marker, China accounted for 90% of Apple’s product factories in 2019.
The double whammy of COVID-19 and the China-US trade war has forced Apple to hedge its bets.
If only there was another country with 1B+ people… oh wait, the subcontinental giant right next door.
India is shelling out to attract smartphone producers
By launching a $6.6B+ federal incentive scheme.
Three Apple manufacturing partners are among the 16 firms that will benefit from the plan.
India projects that attracting these manufacturers will employ 800k people and lead to production of smartphones and electronics totaling $143B over the next 5 years.
When the $2T Apple says “jump”…
… its partners say, “umm, sure, but can you also tell us where you want our plants?”
As noted by Marker, 3 of Apple’s aforementioned contract partners — all based in Taiwan — made relocation headlines over the summer:
- Foxconn started manufacturing the iPhone 11 in India in July and has marked $1B worth of investments for the country
- Wistron started assembling the iPhone SE in August and began a trial run on the new iPhone 12 (official announcement tomorrow)
- Pegatron registered a subsidiary in India
India has a wage advantage
With monthly manufacturing salaries roughly ⅓ of China’s $700/mo. It has a long way to go to match China, though.
In fact, Apple was looking at India as far back as 2015, but the country’s environmental and safety standards weren’t up to snuff.
Today, India’s infrastructure still lags and its component supplier base is middling (Apple has 135 suppliers in China vs. 7 in India).
Another prize: the retail market
There are 1.35B people in India, more than half of whom still don’t have smartphones. The country also has significant room for catch-up growth: China’s GDP per capita is $10.1k vs. $2.2k for India.
Apple was recently allowed to set up an online store in India — and physical retail locations are expected to follow.