Not long ago, critics mocked Apple CEO Tim Cook for his ambition to grow business in India, but now it all makes sense.
India has a lot to offer Apple and technology
India has and always has had a lot to offer Apple: a young population, education, a developing middle class and consumer market, and somewhat low labor costs. Apple has also worked extremely hard with the Indian governments to accommodate that country's desire to protect its economy while opening up to manufacturing.
There's a lot to pick out in that sentence, but essentially that seems to be why local manufacturers like Tata work with Taiwan-based Apple's main manufacturing partners on new factories to support Apple's supply chain. This creates a balance that allows local companies to benefit from the arrival of multinationals.
It also seems to help encourage users to purchase the products. After all, it probably must reflect the tremendous work Apple has done to reach users in India, as it dominated the Indian high-end smartphone market last year, according to Counterpoint.
This means that one in twenty smartphones purchased in India last year was an iPhone. It also explains why Tata announced plans to open XNUMX Apple Stores in India in December.
High demand, low saturation
To put some context around this company, India is currently the second largest smartphone market on the planet, larger than the US, but is marked by significantly lower smartphone penetration (around XNUMX). five%).
In other words, there is room to develop business there. In the US, XNUMX% of people own smartphones, while in the world's largest market, China, XNUMX% do.
As we previously reported, Apple is committed to redesigning its manufacturing and supply chains to become more resilient to future crises. These impacts include the impact of war and disease, of course, but also extend to political insecurity such as that surrounding the US-China relationship.
India will fit fifty percent of iPhones by 2027
Apple needs to protect its manufacturing base and is deeply involved in it, partly as a response to the pandemic. More recently, Digitimes found that India is expected to assemble up to half of all Apple iPhones by XNUMX, up from XNUMX% today.
“The speed of supply chain migration to India will accelerate in the future due to the need to diversify risk in light of pandemic control uncertainties in China,” said Luke Lin, an analyst at Digitimes.
He also expects Vietnam to benefit as Apple production moves out of China.
The forecast follows a prediction by JP Morgan that India will make XNUMX% of iPhones sold globally by XNUMX.
These data points, from 4% today to XNUMX% in a couple of years to XNUMX% in XNUMX years, give some idea of the momentum behind this shift in production.
The pace of change drives critical investments.
Apple's primary partner, Foxconn, spends hundreds of millions of US dollars to build business in India. iPhone manufacturing has already created 000 jobs in India, reportedly XNUMX in manufacturing. Pegatron, Wistron and component manufacturers Avary, Foxlink, Salcomp and others are already there.
Of course, all this manufacturing will require massive investments in power supply. Tata has its solar power generation factories in the southern Indian state of Tamil Nadu, and once again it seems inescapable that Apple will try to invest in environmentally friendly energy to use in its supply chain based in India. India.
Apple reflects a trend
But it's not just about Apple. The company is simply the most discussed brand.
Samsung Electronics is also moving Android production out of China, once again to India and Vietnam. Others, probably including your business associates, are going to do the same. Digitimes tells us that smartphone brands other than Apple and Samsung will reduce their Chinese manufacturing capacity by as much as XNUMX% over the next few years.
With the noted presence of premium brand manufacturing in the country, the Indian government will inevitably become more violent in its competition.
It will redouble its sacrifices to attract more manufacturers, rolling out incentives like its current production-linked incentive (PLI) program to entice them to locate there, helping facilitate local partnerships, and investing in infrastructure to support new manufacturing.
The big names in tech, and not just Cook, have seen this coming for a while.
Look around the front desk of just about any tech company and you'll find well-represented Indian tech executives. Microsoft CEO Satya Nadella met with Indian Prime Minister Narendra Modi this week, so he wrote: "It is inspiring to see the government's focus on sustainable and inclusive economic development led by digital transformation. We look forward to assist India to achieve Digital India". vision and be a light for the planet.
The inevitability of progressivity
In a way, it was always going to be like this. Countless software is already written on the subcontinent, Apple still has its campus there, so it's a natural progression that hardware manufacturing would follow.
Of course, India is not China. There are going to be unique challenges for any company looking to expand its presence in the country. Zones may differ in their business priorities, and many key components cannot yet be manufactured there. The country also has challenges around infrastructure, which poses additional problems, has its internal tensions, and shares borders with nations with which it has its political tensions.
However, the conclusion of this article probably has to be that India is now poised to play an even more essential role in the future evolution of the technology industry.
Apple has simply shed light on the emerging path.
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