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By Malcolm Owen
Monday May 11, 2020 5:12 am PT (08:12 am ET)
Apple is contemplating a major shift from its manufacturing capacity to India, with a possible move of almost a fifth of its production capacity out of China, if the report is accurate.
Apple CEO Tim Cook on a visit to India in 2016
Apple’s supply chain largely consists of the production and assembly of components focused on Asia, with the vast majority taking place in or near China. Over the years, there have been suggestions that Apple is interested in diversifying its supply chain to other countries, but a report on Monday suggests that India may be the greatest potential place for such migration.
Apparently, the top executives of the iPhone maker have been talking to senior government officials in India in recent months, reports the Economic times. The talks focused on Apple being able to step up its local manufacturing efforts in the country, with the possible goal of moving about a fifth of its current manufacturing from China to India.
Officials speaking in the report propose that this could equate to $ 40 billion in local manufacturing revenue over the next five years, and could become Apple India’s largest exporter.
“We expect Apple to produce smartphones worth up to $ 40 billion, primarily for exports through its contract manufacturers Wistron and Foxconn,” said an official, “taking advantage of the benefits of the production-linked incentive scheme (PLI ) “. The PLI scheme aims to provide incentives to companies to encourage manufacturing in the region.
Another official stated that India “is not a great market for Apple, since the company sells only a fraction of its total production in India”, and that Apple is really looking at the country “as a base to manufacture and export, essentially diversifying its production outside of China. “
Apple already makes some manufacturing of iPhones in the country, although currently it is not enough to meet demand. Apple is claimed to sell iPhones worth around $ 1.5 billion per year in India, with a market share of 2-3%, while the value of locally produced iPhones is less than $ 0.5 billion.
To achieve what is proposed in the report, Apple would need to make significant investments in its India-based production, including expanding its local supply chains. To reap the benefits of the government’s PLI scheme, Apple would also need to produce iPhones worth at least $ 10 billion gradually between 2020 and 2025, meeting annual targets along the way.
Upon reaching the goal, the real incentive will be between 4% and 6% of incremental sales during a base year of goods manufactured in the country.
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