Apple looks to India as manufacturing option to problematic China

The news: Apple confirmed that it started making its new iPhone 14 in India as it looks to diversify its supply chain and reduce reliance on China, per CNN. 

A shift in global strategy: Apple famously manufactures the bulk of its products in China, but the company has started producing the iPhone 14—its most important product— in India. 

  • Apple’s announcement comes at a time of increasing economic tension between the US and China that has left US tech companies seeking supply chain alternatives. 
  • Economic uncertainty, COVID-19-related factory closures, and a worsening political relationship between the US and China are existential threats to Apple’s bottom line. 
  • A report from JP Morgan reveals Apple is likely to move about 5% of iPhone 14 production to India from late 2022 and reach 25% by 2025. 
  • It is also forecast that nearly 25% of all Apple products will be manufactured outside China by 2025 as compared to 5% at present. 

Scrambling for alternatives: Apple may be the biggest company shifting production away from China, but it’s not alone. More US companies are following suit and factory hubs in Malaysia, Vietnam, and India are drawing the most interest.

  • Apple already moved iPad and AirPods production from China to northern Vietnam, per The Verge.
  • Microsoft manufactures XBox consoles from Ho Chi Minh City in Vietnam. Google has similarly taken over an old Nokia factory in Vietnam to make its Pixel smartphones. 
  • Amazon is now making its Fire TV devices in Chennai, India.
  • “The empire of manufacturing in China is being shaken,” said Lior Susan, founder of Eclipse Venture Capital which covers hardware and manufacturing start-ups. “More and more capital is going to pull manufacturing out of China and find an alternative.”

The bigger picture: India has the biggest potential to scale its production facilities to match up with China. 

  • For context, Apple suppliers Foxconn, Winstron, and Pegatron are all making iPhones in India and plan on applying for Production-Linked Incentive (PLI), which offers incentives for mobile manufacturers investing in India.
  • The big challenge will be for Indian factories to replicate the tight operational controls and secrecy by which China’s manufacturing hubs operate.

This article originally appeared in Insider Intelligence'sConnectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

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