Apple’s Indian expansion journey stumbles over logistical woes

Addressing the vulnerabilities caused by the pandemic, global supply chains begin to diversify their suppliers and shift their operations out of China. Jumping on this opportunity the Central Government of India stepped up its efforts in promoting Make In India. The government has been working effortlessly to convince global companies of being a credible and reliable alternative to the neighboring nation and fulfilling the manufacturing requirements of the global giants.

Responding in kind, many organizations are now looking towards India, and among these is the American multinational technology company, Apple.

Apple initially 2017 began to cut its reliance on China by assembling some of its devices in India, after which the giant is now gearing up to make India one of its key global manufacturing hubs.

By late 2022, the tech giant moved 5% of its global iPhone 14 production to India. And the brand looks to expand its manufacturing capacity in the country to produce 25% of all iPhones by 2025, JP Morgan analysts said in a report released in mid-2022.

Echoing similar estimations, the company in December last year claimed expansion of both retail and production arms including 100 new franchise stores, and a tripling of iPhone manufacturing in the next two years.

Along these lines, Apple supplier Foxconn is aiming to quadruple its workforce in India over two years. To ramp up its chip manufacturing business in the nation the company made a $500 million investment in December. Part of the investment will likely go toward Apple-related purposes.

Apple is sending product designers and engineers from California and China to factories in southern India, to train locals and help establish production.

India has attracted investments from Foxconn and Wistron on the back of lucrative subsidies offered by New Delhi to make the country a manufacturing hub. The presence of foreign production giants, coupled with “ample labour resources and competitive labour costs,” make India a desirable location.

However, Apple’s move into the nation is not hassle-free. The brand has run into infrastructure and logistical woes.

Apple which prefers zero defect in production has seen only a 50% yield in their production line at Tata’s casing factory in Hosur. Jue Wang, a Bain consultant, said Apple is on the brink of its expansion into India. Though there is time to reach the scale of China’s Zhengzhou factory known as “iPhone City,” “and everybody acknowledges there will be different efficiency, but it is happening,” she said.

A person involved in Apple operations also highlighted that expansion in India is slow partly because of logistics, tariffs, and infrastructure.

The Apple engineers have also reported hours of daily commuting to reach factories and the occasional poor WiFi as reasons for lack of efficiency.

But, despite these issues, Bain estimates that manufacturing exports from India could double from $418 billion in 2022 to more than $1 trillion 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%.

The company has repeatedly proven India’s importance in its plans. Tim Cook, Apple CEO is highly bullish on India and has significant ambitious plans for the nation.

Tata, one of Apple’s suppliers, is also ambitious to become a full-service Apple supplier and is backed by the Indian Government.

As reported by Financial Times, Apple was facilitating discussions that would allow Tata to take majority ownership rather than a 50:50 joint-venture structure.

Meanwhile, the Indian government has also given the preliminary go-ahead to Apple’s Chinese component suppliers to begin operations, in joint ventures with Indian partners.

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