Beijing time on February 14 news, Apple is currently seeking to diversify production and increase iPhone production in India, but this effort has encountered a stumbling block.
Apple has been sending product designers and engineers from California and China to factories in southern India to train locals and help set up production, according to people familiar with the matter.
Apple’s India manufacturing business is just getting started, and the company is building a manufacturing presence in India in a long-overdue diversification strategy, following the blueprint it laid out in China 20 years ago.Apple engineers and designers often spend weeks or months at factories overseeing productionProduce.
Although Apple has been producing low-end iPhones in India since 2017, it only reached a major milestone last September, almost at the same time as China’s production of flagship models.
Last year, a few weeks after the launch of the flagship iPhone 14 made in China, Indian suppliers also started producing the phone. Previously, nearly all iPhones and other Apple hardware were made in China.
However, Apple’s experience in recent months has shown that it has more work to do in India.
poor yield
One of Apple’s suppliers is Indian conglomerate Tata, which operates a phone case factory in Hosur. At the factory, only about one in two components that roll off the production line is of good enough quality to be sent to Apple assembler Foxconn, according to people familiar with the matter.
Compared with Apple’s zero-defect goal, this 50% “yield rate” is difficult to meet. The factory is planning to increase proficiency, but there is still a long way to go, said two people who have worked in Apple’s overseas operations.
According to Jue Wang, a consultant at Bain & Company, Apple is in the early stages of expanding into India.
“We’re not talking about the size of the Zhengzhou factory. Everyone admits that the efficiency of the Indian factory will be different, but this is happening.” She said. The Zhengzhou factory, a factory hub in China known as “iPhone City,” employs about 300,000 workers.
lack of urgency
In China, suppliers and government officials have taken a “whatever it takes” approach to win iPhone orders. For example, former Apple employees said: They once estimated that a certain task might take several weeks to complete, but when they came to work the next morning, they found that the task had been completed at an incredible speed.
In contrast, Apple’s business in India is not running at this pace, according to a former Apple engineer with knowledge of India’s operations: “There’s just a lack of urgency.”
Apple’s expansion into India has been slow, in part because of logistics, tariffs and infrastructure, a person involved in Apple’s operations said. Apple’s diversification in Southeast Asia has been smoother thanks to the Regional Comprehensive Economic Partnership Agreement, the person said. The agreement is a free trade agreement signed by 10 regional countries.
Apple’s mobile phone share in India is less than 4%
This inertia has been a problem for years, said Mark Zetter, president of Venture Outsource, an electronics foundry industry consultancy.
Five years ago, when Zette was doing research for the Indian think tank Gateway House, he found that Indian contract manufacturers often claimed that they could meet “any demand” of electronic product customers. But in practice, they were “slow to respond to customer concerns after the agreement was signed” and “lacked flexibility” in responding to changes.
Apple engineers also sometimes live in hotels in central Chennai, the capital of the southern Indian state of Tamil Nadu, two hours away from the factory where they work. It’s a four-hour daily commute, with the occasional poor WiFi network along the way. Apple declined to comment.
obstacles everywhere
Despite these initial problems, analysts say India has huge potential for Apple. Driven by policy support and low costs, India’s manufacturing exports could more than double from $418 billion in 2022 to more than $1 trillion in 2028, Bain estimates. The firm estimates that India’s electronics exports alone will grow by as much as 40% a year.
Vivek Wadhwa, a Silicon Valley entrepreneur and academic, met with government officials, including Prime Minister Narendra Modi, last month. India’s central government is encouraging companies to seize opportunities in Apple’s diverse demand, he said.
He said the provincial government is “doing everything it can to bring in industry, and they’re going to follow what China has done,” “but it’s still in its infancy. Apple is getting their feet on the ground right now, learning what works and what doesn’t… In three years, you’ll be We’ll see it grow in size.”
Wadhwa acknowledged that the fragmentation and bureaucracy of the Indian government is something Apple needs to adapt to. He advises engineers to learn the art of Jugaad, or a method of “surviving” or overcoming obstacles. “Because in India, everything is an obstacle,” he said.
Apple’s recent job adverts make it clear that the company has big ambitions in India. This year, India is expected to surpass China as the world‘s most populous country. One of the ads told prospective employees that they would “develop an emerging business in India servicing all of Apple’s product lines while simultaneously building the factory of the future”.
Indian version of Foxconn
During Apple’s earnings call earlier this month, the word “India” was mentioned 15 times. Apple CEO Tim Cook said he was “very bullish” on India. He called the market “very exciting” and a “big focus” and confirmed plans to open the first Apple Store in India soon.
Tata has ambitious plans to become a full-service Apple supplier like its Taiwanese counterpart, people familiar with the matter said. Tata has the approval and backing of the Indian government, and the Indian conglomerate is in talks to buy an iPhone assembly plant near Bengaluru from Foxconn’s Taiwanese rival Wistron. Wistron is looking to exit the Indian market after labor unrest and protests in 2020.
A person familiar with the plans said Apple was pushing for talks to allow Tata a majority stake, rather than a 50:50 joint venture structure. Tata declined to comment on its plans. Wistron has yet to comment. At the same time, according to a person familiar with the matter, the Indian government has initially approved the establishment of a joint venture between Apple’s Chinese component suppliers and an Indian partner to start operations.
Earlier this month, Indian Finance Minister Nirmala Sitharaman said India intends to offer duty relief on imports of certain parts and components used in mobile phones, such as camera lenses, to “defend the Domestic Value Added in Mobile Phone Manufacturing”.
An electronics industry executive in Tamil Nadu said Apple was late to the game. “They should have started doing this five years ago,” he said. “They should have started diversifying earlier so they can benefit at this time.”
