What Is The Significance Of Apple's 'Make In India' Push?

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In May 2016, when Apple CEO Tim Cook met Prime Minister Narendra Modi in New Delhi, he spoke about the possibilities of manufacturing and retailing in India, in line with the country’s ‘Make in India’ push.

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The following year, the $2.5 trillion American tech giant started its manufacturing in India with the budget iPhone SE model via contract manufacturer Wistron when the phone was already more than a year old.

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So the iPhone 11 started rolling out of factories here in July 2020, ten months after the launch. The iPhone SE 2020 started coming out within three to four months of its launch while the production of iPhone 12 started within a lag of less than six months.

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On September 12th, US publication The Information reported that Google parent Alphabet is considering moving some production of Pixel phones to India.

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Local demand in India, the world’s second-biggest smartphone market, has played some role in Apple’s decision to expand manufacturing capacity here. This is bolstered by the Production Linked Incentive scheme for smartphone manufacturing. All three Taiwanese Apple suppliers making iPhones in India are covered under the PLI scheme.

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While Apple has a negligible share in India’s overall smartphone market, it is the top-selling brand with about 60% share in the ultra-premium segment, which includes smartphones priced at Rs 45,000 and above.

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In the affordable premium segment, i.e phones priced between Rs 30,000 and Rs 45,000, Samsung held the top slot, closely followed by Apple. Overall, Apple had a 3% smartphone market share in the April-June quarter, up from 1% a year ago.

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In FY22, Wistron and Foxconn helped the company export phones worth over Rs 10,000 crore. This year, Apple’s partners in India are expected to export 11-12 million iPhones, up from 7.5 million last year. Its third vendor Pegatron started local assembly in April.

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Made-in-India units will meet 85% of the local demand for iPhone, touching record highs in 2022, against just 10-15% last year. Further, Indian factories are expected to make 5-7% of all iPhones sold globally this year. In 2021, India’s contribution stood at a little over 3% and the number was less than 1.5% in 2020.

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On the other hand, China’s contribution is expected to drop to 93.5% this year, from 95.8% in 2021 and 98.2% in 2020. While the local value addition with respect to iPhones is currently 18-20%, this is set to go up.

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Today, manufacturers essentially save on customs duty and enjoy the labour arbitrage provided by India because when smartphones are assembled here, a majority of the components are still imported.

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A steadily growing local supply chain will help global players increase local procurement, enabling them to save on not just labour costs but also component import-related costs.

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As India develops a strong component ecosystem in the coming years, it will transform into a viable export hub and position itself as the next China in this sector.

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