Apple’s efforts to reduce its reliance on China by increasing production in India have hit a roadblock, according to a report published in the Financial Times. The report highlights the challenges faced by the tech giant in its efforts to establish its supply chain in the country. Apple has been sending engineers and product designers from California and China to factories in southern India to train locals and help establish production. This is in line with the company’s efforts to diversify its supply chain strategy, following months of Covid-19 disruption that led to a decline in quarterly revenues.
While Apple has been producing lower-end iPhones in India since 2017, last September was significant, with Indian suppliers building flagship models within weeks of their launch in China. However, its experience in recent months has demonstrated the scale of the work to be done in the country. The report states that at a casings factory in Hosur run by Indian conglomerate Tata, just about one out of every two components coming off the production line is in good enough shape to eventually be sent to Foxconn, Apple’s assembly partner for building iPhones, according to a person familiar with the matter. This 50 per cent “yield” fares badly compared with Apple’s goal for zero defects.
The report highlights that operations in India are not running at the pace seen in China, where suppliers and government officials took a “whatever it takes” approach to win iPhone orders. Apple engineers have also been housed at city-centre hotels in Chennai, two hours away from the factories where they are working, requiring four hours of daily commuting, with occasionally poor Wi-Fi connections along the route.
Despite these challenges, analysts say India’s potential for Apple is huge. The report quotes a consultant at Bain, who estimates that manufacturing exports from India could more than double from $418bn in 2022 to more than $1tn in 2028, driven by policy support and low costs. It estimates that electronics exports alone will grow at an annual rate of up to 40 per cent. Vivek Wadhwa, a Silicon Valley-based entrepreneur and academic who last month met with government officials, including Prime Minister Narendra Modi, said the central government is encouraging businesses to take advantage of Apple’s need to diversify from China.
Recent job ads from Apple make clear it has major ambitions in the country. One ad tells prospective employees they will “grow nascent operations in India to service all product lines of business at Apple while simultaneously building the factory of the future”. “India” was also mentioned 15 times in Apple’s earnings call earlier this month, with CEO Tim Cook calling the market “hugely exciting” and “a major focus” and confirming plans to open the first Apple Stores in the country soon.
According to the FT report, Apple declined to comment.
Apple’s recent job postings make its national ambitions quite obvious. They are looking to “grow nascent operations in India to service all product lines of business,” as one advertisement puts it.