Apple began assembling some of its devices in India and Vietnam a few years ago, gradually reducing its dependence on China. The Cupertino giant is now gearing up to make the two countries key global manufacturing centers, according to JP Morgan analysts.
In a report they sent out to customers on Wednesday, JP Morgan analysts said that by the end of 2022, Apple will move 5% of global iPhone 14 production to India and expand its manufacturing capacity in the country to make 25% of all iPhones by 2025.
Vietnam, on the other hand, will produce 20% of all iPad and Apple Watch production, 5% of MacBooks and 65% of AirPods by 2025, according to a report reviewed by TechCrunch.
In recent years, India has attracted investment from Foxconn and Wistron by offering lucrative subsidies as New Delhi aims to turn the country into a manufacturing hub. The presence of foreign manufacturing giants, combined with “sufficient labor resources and competitive labor costs,” make India a desirable destination, analysts say.
Apple rival Samsung identifies India as a key global manufacturing center and has established one of its largest factories in the country. Chinese smartphone maker Xiaomi, which currently leads the market, as well as rivals Oppo, Vivo and OnePlus also assemble a number of their phones in the country.
Google is also planning to move some of its Pixel smartphone production to India, The Information recently reported. The company, which has missed deliveries of flagship models to India for two generations, said Wednesday it will launch new Pixel 7 models in India.
While Apple has a tiny market share in India, the iPhone maker has expanded its investment in the country over the past five years. The company opened its online Apple Store in the country two years ago and has publicly said it is working on launching its first physical store in the country.
Analysts have calculated that Foxconn now has more than 20,000 iPhone assembly operators in India, compared to 350,000 in China.
“The iPhone supply chain in India has historically only supplied legacy models. Interestingly, Apple has required EMS suppliers to manufacture the iPhone 14/14 Plus models in India in Q4 2022, within two to three months of production in mainland China. The much shorter interval implies the growing importance of manufacturing in India and likely higher allocation of iPhones to manufacturing in India in the future,” the report says.
“We believe that Apple is now only producing the iPhone 14/14 Plus models in India due to more complex customization of the iPhone Pro series camera module (done by EMS vendors) and higher demand for the iPhone 14 series in the local market (tax savings). We expect Q4 2022 sales to be modest (~1 million units per month, or 5% of total iPhone sales).”
In the “short term”, China and Taiwan will continue to gain market share thanks to better cost structures, analysts said.
“Taiwanese EMS providers, especially Pegatron and Wistron, are more selective and prioritize profitability, with a focus on emerging areas such as electric vehicles and servers. Hon Hai remains the main EMS partner for iPhone and should benefit from the move to India,” the report says.
“The share of production in mainland China should shift towards local suppliers, while Taiwanese EMS has an advantage in India. We expect that in Vietnam the share will be split between Taiwan EMS and Mainland China.”