Apple makes iPhone 14 in India amid China woes

Apple is ramping up its production of iPhones in India. With the iPhone 14 series, Apple’s iPhone production in India is slated to jump from 7 million iPhones in 2021 to touch a new milestone of around 12 million iPhones in 2022.

According to industry analyst Ming-Chi Kuo, Apple will start the production of the new iPhone 14 in India “about six weeks” later from China. “The iPhone 14’s mass production schedule in India this year is still about six weeks behind China, but the gap has improved significantly,” Kuo said in a tweet this month.

Apple has three contract manufacturers in India, Foxconn (Hon Hai), Wistron and Pegatron. The three Apple partners are part of the Indian government’s production-linked incentive scheme for mobile manufacturing. They need to make products worth a minimum of Rs 8,000 crore each this year to get the incentives.

THE STORY

Since the beginning, China has been the go-to place to manufacture the iPhone but lately due to potential signs of instability in China, Apple is increasingly looking toward India to pick up some of that manufacturing capability.

Why, in the first place was why was China selected to manufacture the iPhone. When in 2007, Steve Jobs decided to have a glass screen instead of plastic for the first iPhone. He made this decision, just weeks before its launch. American companies said that this last minute switch was impossible. However, a Chinese factory said that they could do it. They constructed a dormitory beforehand, so their workers could work 12-hour shifts. When the contract was signed with Apple 8000 workers were woken up from sleep, given a biscuit and tea and then got to work, fitting the glass screen to the iPhone, to in the end produce 10000 iPhones per day.

If this work was done in the United States, one, it would be much more expensive and two, it would take a few months to gather all the workers, while in China it only took a few days. Leaving aside the obvious human rights issues, stories like this highlight why China is dubbed the world’s factory, and why the iPhone is mostly made there. But as mentioned recently things have begun to swing toward India.

Apple first started manufacturing iPhones in India in 2017 with the iPhone SE. Since then Apple has been working with suppliers to ramp up manufacturing in India and now it’s picking up the pace. In 2020, India was making 1.5 percent of global iPhone supply. Currently the country accounts for about five percent of supply. With the iPhone 14 in 2022 Apple wants to race this to seven percent. That’s around 12 million iPhones.

Earlier this year, Apple even started making the iPhone 13 in India. Last month Apple analyst, Ming-Chi Kuo stated that iPhone 14 production would begin in India six weeks after beginning in China. Usually this lag would be six to nine months. It’s believed that iPhone 15 production next year will begin simultaneously in both countries. And the Indian government has offered financial incentives for tech production, the Make in India program.

Foxconn, the primary manufacturer of iPhones studied the process of shipping components from China and assembling the iPhone 14 at a plant in Chennai.

While this may be good news for India, there are still three main hurdles to overcome.
Number one, there is a huge supply chain network in China which doesn’t exist in India. It would take a lot of investment to get a parallel Indian system to a comparable state. Assembling iPhones often entails coordination between hundreds of suppliers and this isn’t to mention Apple’s infamously tight deadlines and strict quality control.

Number two, for Apple, there’s a great deal of risk when it comes to security and secrecy when moving to a new country. Apple goes to extreme lengths to keep new product details confidential and to stop leaks. Imposing the same rigorous controls in a second country would prove to be very difficult. Local Foxconn executives in India have thought about entirely cornering off a section of one of Foxconn’s assembly lines. According to Bloomberg, they placed a great deal of scrutiny on how security around the device could be compromised. The conclusion so far is it’s going to be a real challenge to replicate the drastic security controls that the Chinese facilities have. In addition to this, also according to Bloomberg, Apple has major concerns about Indian custom officials. They usually open up packages and check their contents. this is to make sure materials match their declarations. and it goes without saying that this is a massive potential vulnerability for product security.

And number three. India’s workforce and factories have caused a bit of a headache for Apple over the past five years. There have been disputes and even revolts over poor quality food and pay. It seems that this will probably be the easiest issue to fix. improve the facilities and re-examine wages.

So why is Apple doing all of this exactly. The key word is uncertainty. Because of the economic and geopolitical climate, Apple sees a need to diversify its supply chain and build redundancy. They’re seeking alternatives as the CCP clashes with the US government.

A visit to Taiwan by the speaker for the United States House of Representatives, Nancy Pelosi came at possibly the worst time. It partly destabilized the Asia Pacific region at a time when tensions were already high. Harsh lockdowns across China especially those in the manufacturing hubs have really disrupted economic activity these lockdowns. As well as US sanctions have put a dent in China’s manufacturing prowess. Couple this with rising labour costs in China and a shaky property market and it’s no wonder Apple is starting to look elsewhere for manufacturing.

Of course, this does not mean Apple is going to move entirely out of China!

CT Bureau