NASDAQ share Apple wants to have more components manufactured in India – production is anything but smooth

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• Delivery delays in China make Apple look to India
• Some challenges at the beginning
• Focus on Tata

Chinese suppliers are causing Apple delivery problems

Although China deviated from its zero-COVID policy at the end of 2022 after strong protests, the tough measures in the two years before had had consequences for the economy of the People’s Republic. Numerous lockdowns meant that the assembly lines in many factories came to a standstill, which also affected the iPhone manufacturer Apple. Although the company is based in Cupertino, California, the majority of the components used in its own products are manufactured in China and Taiwan. The Taiwanese manufacturer Foxconn is currently still Apple’s most important production partner. Last year, however, corona-related plant closures and employee protests for better working conditions put pressure on the supplier’s production capacity. Although the iGroup recently found a new partner in China in Luxshare, there were still delivery bottlenecks in November and December. Apple recently had to report the first decline in quarterly sales in three and a half years.

Expansion of production planned in India

As people familiar with the matter told the Financial Times, Apple wants to become less dependent on Chinese suppliers and rely more on Indian producers. Parts for entry-level iPhones have been manufactured in Germany since 2017, but components for flagship models have also been produced there since September 2022. According to this, product designers and engineers from Apple’s headquarters in California are said to have been sent to support the development of production in southern Indian factories. According to experience, this process can take weeks or months before the components can be manufactured independently, according to the daily newspaper.

Poor production quality

So far, however, Apple is still a long way from this goal, as the FT report says. In a housing factory in Hosur, which is operated by the Indian conglomerate Tata, only every second manufactured component should be of sufficient quality and can actually be used. This conflicts with Apple’s claim to run flawless production. Insiders told the newspaper that an improvement plan was in place, but that the path to get there was rocky.

Expansion of Apple’s India business is still in its infancy

Still, it’s important to remember that Apple is only at the beginning of its expansion into India. “We’re not talking about the same scale as the Zhengzhou factory,” Bain consultant Jue Wang told the Financial Times, “and everyone recognizes that there will be different efficiencies, but it’s happening.” In the long term, however, strong growth can be expected here. The consultancy reckons that Indian manufacturing exports could grow to more than $1 trillion in 2028 from $418 billion in 2022. Electronics exports alone could increase by 40 percent per year.

“No sense of urgency”

Nevertheless, the iGroup, which can look back on many years of experience with its Chinese and Taiwanese manufacturing partners, is likely to stumble over the significantly different environment in India. The mills in the republic grind considerably more slowly than the US group of Foxconn and Co. might be used to. “There’s just no sense of urgency,” a former Apple engineer commented on the Indian factories’ approach. Not only are the processes being lengthened by logistics, customs duties and the expandable infrastructure, part of the blame also lies with the companies themselves. Venture Outsource President Mark Zetter told the newspaper that factories often promise their partners that they will meet “any need” but then respond slowly and inflexibly to queries once the contracts have been signed. According to a senior executive in the electronics industry in Tamil Nadu, who wishes to remain anonymous, Apple should have expanded into India much earlier in order to be able to operate a functioning production facility. “They should have started five years ago,” the employee told FT. “They should have started diversifying earlier so they can benefit now.”

Cooperation between Apple and Tata is emerging

According to the report, Tata is currently trying to gain favor with Californians and become one of the company’s main suppliers. The conglomerate is receiving support from the Indian government. In order to achieve this status, the purchase of an iPhone assembly plant in Karnataka is also under discussion. The facility was previously run by Taiwanese paver Wistron, but the company plans to exit after workers’ uprisings in 2020. Apple itself is also striving for Tata to take a majority stake in this.

First Indian Apple Store in March

With the production plans in India, the first Apple Stores should also soon be realized there. So far there are no official stores of the NASDAQ size in the republic, although these have been in the planning for years, according to the paper. Now, however, sales staff are said to have been hired, and other positions are currently being advertised. A store with more than 2,000 square meters is scheduled to open its doors in Mumbai as early as March, but according to the job advertisements, other locations could also be planned.

Editorial office finanzen.net

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