Apple’s Strategic Shift: India’s Role in iPhone 16 Production and Beyond

In a groundbreaking development for both Apple Inc. and India, the iPhone 16 series, for the first time, will be available worldwide within days of its launch, and it will be manufactured in India. This monumental shift underscores Apple’s strategic move to diversify its production base away from China, primarily due to escalating geopolitical tensions. Foxconn, Apple’s long-standing manufacturing partner, has already commenced production of the iPhone 16 series in India, with plans to export these devices to multiple cities and countries. This marks a significant milestone as it is the first instance of a global player offering a product manufactured in Indian factories almost immediately after its global launch.

The success of iPhone production in India is a testament to the importance of local manufacturing for the US tech giant. Apple’s decision to manufacture the iPhone 16 Pro and Pro Max models in India further emphasizes this point. These models, known for their advanced features, including artificial intelligence, will also be shipped overseas in the coming months. This move not only highlights Apple’s commitment to India but also signals a broader strategy to reduce its reliance on China. The diversification of its production base is a crucial step for Apple, especially in the current global economic climate.

Apple and Foxconn have not immediately responded to requests for comments, but the implications of this move are clear. India currently contributes 14% to Apple’s overall production, a figure that has doubled from the previous year according to a report by JPMorgan. This growth is indicative of India’s emerging role as a key hub for global exports. Apple plans to shift 25% of its iPhone production to India by 2025, further solidifying its commitment to diversifying its manufacturing base. Currently, iPhones are only made in India and China, but the gap between the launch of India-made iPhones and their global availability has reduced significantly over the past four years.

In 2021, the gap was a few months, but by 2022 it had reduced to less than two weeks. Last year, the iPhone 15 was launched simultaneously in India and China, but the India-made devices were only available in India on the first day of sale. This year, however, the Made in India iPhone 16 series will be available in various countries within days of its release. This rapid reduction in the time gap underscores the efficiency and capability of India’s manufacturing sector. It also reflects Apple’s confidence in its Indian operations and the country’s potential as a major player in the global supply chain.

Apple’s contract manufacturers produced iPhones worth ₹1.20 lakh crore in India in FY24, with ₹85,000 crore exported. This significant contribution underscores Apple’s role as a leader in driving mobile phone exports from India. The company has been instrumental in the success of the Production Linked Incentive (PLI) scheme for smartphones, which aims to boost local manufacturing and increase exports. Apple’s increasing efforts to enhance Indian value addition in its products, including the iPhone and AirPods, are part of a broader strategy to diversify its supply chain away from China.

To achieve this, Apple is seeking partnerships with non-Chinese and Indian vendors. The company is actively looking for new partners and is in talks with key players in the industry. US-based Flextronics is being considered for power equipment production in India, while Jabil, an American manufacturing solutions provider, is also being looked at. These partnerships are crucial for Apple as it seeks to increase the Indian presence in its supply chain and reduce its reliance on China. The focus on localizing production and enhancing value addition within India is a strategic move that will benefit both Apple and the Indian economy.

Apple is also exploring potential collaborations in Haryana, Uttar Pradesh, and Karnataka to manufacture components. This move would further localize production and enhance value addition within India. Flextronics and Jabil are in talks to produce power equipment, while Aequs, a Karnataka-based company, is in discussions to supply non-iPhone enclosures. These partnerships reflect Apple’s active pursuit of diversifying its supply chain in India. Additionally, Apple’s international vendors are looking into partnerships with Tata Group firms for manufacturing capital equipment, which is essential for increasing domestic value addition in Apple’s Indian operations.

The tech giant is also searching for Indian partners for joint ventures in display and camera module production. In 2022, Apple secured a partnership with Japanese mobile lithium-ion phone cell battery maker TDK, which has since set up a production facility in Gurugram, India. Although the investment figures for this facility have not been disclosed, this partnership highlights Apple’s commitment to enhancing its supply chain capabilities in India. These efforts reflect the current trend of companies diversifying their supply chains away from China and increasing their investments in India.

India’s emergence as an attractive alternative to China in the global trade market is further evidenced by Apple’s decision to produce its most expensive iPhone models in the country. Historically, Apple has relied heavily on China for sourcing components and product assembly. However, the rapid shift to Indian production indicates a significant change in strategy. While non-Chinese competitors of Apple have preferred South-East Asia, particularly Vietnam, as a location for phone assembly, India is now being seen as a potential alternative. This shift is largely due to India’s progress in improving logistics infrastructure and its growing demand, which continues to attract investment.

As the world restructures its supply chains, India is becoming a likely alternative for production. This is particularly relevant as geopolitical tensions continue to impact global trade dynamics. The labor union, Verdi, in Germany is backing a private move, and UPS is implementing multiple surcharges for the peak season. Meanwhile, the global air freight market has been growing positively for the past year. These developments highlight the ongoing changes in the global supply chain landscape and the increasing importance of India as a key player in this space.

In conclusion, Apple’s strategic shift to increase its production in India and reduce its reliance on China is a significant development with far-reaching implications. The successful production and global availability of the Made in India iPhone 16 series within days of its launch underscore the efficiency and capability of India’s manufacturing sector. This move not only reflects Apple’s confidence in its Indian operations but also signals a broader trend of companies diversifying their supply chains away from China. As India continues to attract investment and improve its logistics infrastructure, it is poised to play a crucial role in the global supply chain landscape.

Apple’s partnerships and collaborations in India showcase the company’s efforts to increase value addition and localize its production. By seeking partnerships with non-Chinese and Indian vendors, exploring potential collaborations in various states, and securing joint ventures in display and camera module production, Apple is strategically positioning itself to leverage India’s growing manufacturing capabilities. This shift is not only beneficial for Apple but also for the Indian economy, as it boosts local manufacturing, increases exports, and enhances the country’s role in the global trade market. As the situation continues to evolve, it will be interesting to see how these developments shape the future of Apple’s supply chain and the broader global trade landscape.