apple (AAPL) he doesn’t want to be surprised anymore.
Like other multinational companies, the iPhone maker has been affected by the covid-19 pandemic, which has exacerbated disruptions in supply chains.
The restrictive measures and lockdowns imposed in China to limit the spread of the virus have particularly affected the local suppliers of many Western companies. China’s zero-covid policy has turned into a nightmare for suppliers, again forcing some factories to temporarily close or their workers to work in exceptional conditions, such as living in production sites.
This dependence on China has raised many questions that companies have been trying to answer since the pandemic emerged. The most relevant is supply chain diversification, or trying to have suppliers both locally and in different regions of the world.
iPhone 14 will also be manufactured in India
Apple just answered this. The Cupertino, California-based group will now manufacture parts of the new iPhone, the iPhone 14, in India, which is a big first.
Confirming the speculation, the company said in a statement on September 26: “The new iPhone 14 series introduces new technologies and important security features. We are delighted to manufacture iPhone 14 in India.”
The iPhone 14 will be assembled by Foxconn, Apple’s historic supplier in the country, which has a factory on the outskirts of Chennai. These phones will be sold locally in the next few days, but will also be exported to other markets.
Apple’s decision also comes amid rising tensions between Washington and Beijing over Taiwan. The Biden administration has banned chipmaker Nvidia (NVDA) for example, from selling some of its chips to Chinese companies. Beijing, in turn, has taken steps to develop the technology sector.
If Apple has been assembling iPhones in India since 2017, it has always been the older versions, not the newer ones. The iPhone 14 is the first new smartphone that Apple will manufacture outside of China. It therefore marks a shift in CEO Tim Cook’s group’s strategy.
This decision allows Apple to do two important things.
While the majority of iPhone production is still in China, the tech giant will diversify its supply chain.
India, New Eldorado
The decision also allows Apple to establish itself in a growing market where its market share is still very low. Indeed, according to a Counterpunch Research study of smartphone shipments in the second quarter of 2022, Apple only has a 3.8% market share in the world’s second largest smartphone market.
China’s Xiaomi dominates the Indian smartphone market (XIACY) South Korea’s Samsung is in second place with a 19% market share (SSNLF) also with a 19% market share. According to Counterpunch, smartphone shipments in India rose 9% year-on-year to 37 million units between April and June.
However, the market is down 5% from the quarter.
Apple “remained the best-selling brand in the ultra-premium segment,” which includes phones priced at least $650, or Rs 45,000, the report said. “Increasing Make in India opportunities for both domestic consumption and exports, offline push through multiple promotions and consumer brand preferences (…) helped Apple maintain its dominance in the premium segment.”
He added: “The opening of its own e-store, offers on the iPhone SE 2022 and other models will further increase Apple’s shipments in the coming quarters.”
Apple launched the iPhone 14 in early September and its base price in India is Rs 79,900, equivalent to $980.
By manufacturing its new products locally, Apple will be able to attract customers looking for the latest innovations, and the group will also be able to benefit from local support at a time when Indian authorities are trying to boost the technology sector by all means.
In a recent study released on September 21, JPMorgan analysts expect Apple to move 25% of its entire iPhone production line to India by 2025 as it looks to diversify its supply chain. They added that by the end of 2022, 5% of iPhone 14 production will be transferred to India, and an important decision will be made three years later.
In addition to moving 25% of iPhone production to India by 2025, JPMorgan analysts said the company could also move 25% of its other product lines, including AirPods, Macs, Apple Watch and iPad, to the country.