India seeks to attract component manufacturers as Apple iPhone exports skyrocket to $10 billion: Tata Electronics Secures Assembly Contract
The Indian government is actively working to position India as a prominent player in electronics manufacturing, with a notable focus on Apple. Previously reliant on Chinese facilities for iPhone production, Apple has now shifted a significant portion of its assembly operations to India.
In the fiscal year 2023-24, India exported approximately $15 billion worth of smartphones, with iPhones contributing 65%, amounting to about $10 billion—an increase from $5 billion the previous year. While Foxconn, the world’s largest electronics contract manufacturer, operates major assembly operations for iPhones in India, Tata Electronics secured a contract to assemble iPhones for the first time.
Apple’s Expansion Boosts Job Growth and Infrastructure Development in India’s Electronics Sector
Apple has also emerged as a significant employer in India, with a substantial portion of its workforce being women at its assembly facilities. According to Union Minister of Electronics and IT Ashwini Vaishnaw, Apple currently employs 150,000 people directly, with expectations of a significant increase in the future. Over the next three years, the IT ministry estimates that the supplier chain ecosystem will expand to employ nearly 500,000 individuals.
Apple’s expansion in India has prompted several of its foreign suppliers to establish operations in the country as well. According to Vaishnaw, key players in various components of the supply chain, including camera modules, communications, power supply, and digital signal processing, are actively exploring opportunities to establish a presence in India.
This trend also leads to significant improvements in infrastructure in the surrounding areas. For example, at Sriperumbudur, Apple’s primary manufacturing hub located about 40 km from Chennai, where Foxconn operates two major iPhone assembly plants, two large dormitories are being constructed, primarily for female workers. These dormitories are modeled after Zhengzhou’s iPhone city in China.
India Poised to Manufacture One-Fourth of Global iPhones by 2028 Despite Challenges
According to Bloomberg, approximately one in every seven iPhones sold worldwide in fiscal year 2024 was manufactured in India. The government anticipates that by 2028, one-fourth of all iPhones globally will be made in India, along with some accessories like AirPods being assembled in the country. Over the next two to three years, Apple aims to increase its iPhone production in India to over 50 million units annually.
Although the efficiency of the new iPhone manufacturing unit in India has not yet reached the level of factories in China, Apple’s suppliers considering establishing a base in India encounter obstacles such as New Delhi’s unfavorable stance towards mainland companies and high tariff rates for importing components.
In 2023, Apple’s suppliers’ list revealed that 157 contractors were manufacturing in mainland China, an increase from 151 the previous year.
Meanwhile, the number of Indian suppliers has remained unchanged at 14, indicating limited progress in reducing dependence on China despite Apple’s expanding presence in India and Southeast Asia.
However, factors such as government subsidies offered under the production-linked incentive (PLI) scheme for smartphone production, deteriorating relations between the US and China, and stringent Covid-19 restrictions imposed by Beijing have prompted Apple to relocate a significant portion of iPhone assembly to India.
Apple’s Success in India Spurs Growth in Electronics Manufacturing, Attracting Interest from Google and Domestic Players
Apple’s contract manufacturers, including Foxconn, Pegatron, and Wistron (now owned by Tata), have successfully met the sales and investment criteria necessary to qualify for incentives under the PLI scheme. While the government doesn’t disclose individual payouts, it’s understood that these three Apple assemblers, along with Samsung and Dixon, are anticipated to receive over Rs 4,500 crore for achieving their PLI targets in the fiscal year 2023.
Foxconn, the largest iPhone assembly operator in India, currently employs over 40,000 individuals at its facilities in Tamil Nadu. Pegatron operates on a smaller scale, employing approximately 10,000 workers. Wistron, recently acquired by Tata, has a workforce of 27,000 at its plant.
Apple’s expansion in India has attracted interest from companies like Google, prompting them to consider assembling phones in the country. Additionally, there has been a surge in domestic contract manufacturers such as Tata Electronics, Dixon, VVDN, and Kaynes, which have stepped up to fulfill assembly orders from foreign smartphone makers. India possesses a substantial workforce capable of handling assembly operations, which are relatively simpler compared to component manufacturing and require higher skill levels.
Indian Electronics Manufacturing Gains Traction with Diverse Supplier Network, Yet Faces Tariff Challenges
According to Vaishnaw, contract manufacturing is a complex process that demands precision work, and Indian manufacturers have honed these processes over the years to meet global standards. Apart from Foxconn, Pegatron, and Tata, which assemble iPhones, there are 11 other firms in India supplying various components required for phone manufacturing. For instance, Foxlink, a subsidiary of Taiwanese Cheng Uei Precision Industry Co Ltd, manufactures cables for iPhone chargers in Andhra Pradesh.
Battery packs are sourced from US-based Flex Ltd, which operates factories in Pune, Chennai, and Bengaluru, while China-based Sunwoda Electronic Company Ltd, with a plant in Uttar Pradesh, also supplies batteries to Apple. Jabil, from its Pune plant, produces plastic casings and enclosures for AirPods, which are then shipped to China and Vietnam for final assembly. Chargers are sourced from China-based Lingyi iTech (Guangdong) Company, which has a plant in Chennai.
Although some foreign suppliers have begun manufacturing in India, their number remains small compared to Apple’s suppliers in China. The industry believes that India needs to address its import tariff policies. Earlier this year, the India Cellular and Electronics Association reported that India has among the highest tariff lines for smartphone components, with a simple average Most Favoured Nation (MFN) tariff for inputs of 8.5%, higher than China’s 3.7%.
Indian Government Collaborates to Address Import Tariffs, Aiming to Boost Electronics Manufacturing
High import tariffs are typically imposed to support domestic industries, but in situations like India’s where there’s a lack of local industry, these tariffs can discourage investment. An official from the IT Ministry acknowledged this issue and stated that they are collaborating with the Commerce Ministry to reduce or eliminate tariffs on various components. The goal is to streamline the tax rates to align with global standards, making it easier for companies to import components without worrying about complex classification. While high tariffs are often used to nurture domestic companies during their growth stages, there’s a need to strike a balance to attract more suppliers to India.
Also read: Apple Alerts Users in India and 91 Nations to Potential ‘Mercenary Spyware’ Threat
2 thoughts on “India seeks to attract component manufacturers as Apple iPhone exports skyrocket to $10 billion”