Apple aims to make India one of its key global production hubs. This will include assembly of the latest flagship iPhones in sync with worldwide release schedules and help as a de-risking strategy against the bulk of its production being located in China, currently in a trade spat with the US, said people with knowledge of the matter.
The company has just started commercial production of the iPhone XR locally at the Foxconn facility near Chennai after undertaking trials for several weeks, reflecting a move up the manufacturing value chain in India. Following this, Apple plans to start making the latest iPhone 11 series.
Making the iPhone XR involves a higher level of technical skill, the executives said. Apple will export the devices to other markets after having tested the waters with the export of iPhone 6s and 7 models to Europe in the past few months.
While Apple will be able to save around 20% in import duty through local manufacturing of the iPhone XR, the executives said this won’t lead to any price drops. Apple hasn’t cut prices on any of its locally made iPhones.
Apple now has two of its big global contract manufacturers operating in India. Before Foxconn, Taiwan’s Wistron had started iPhone assembly in India near Bengaluru in 2017 but this was limited to older models.
The US and China are said to be entering into a trade deal under which Washington is to suspend a proposed tariff escalation on Chinese imports that would have hit Apple, which assembles most its iPhones in that country. The ramp-up of India manufacturing will allow Apple to have an alternative base and derisk its production strategy, said the executives cited above.
The Foxconn plant is Apple’s biggest manufacturing bet in India since it will have the capability to manufacture the top iPhone models that sell for more than Rs 1lakh each. Earlier this year, Foxconn Technology Group founder Terry Gou had said the iPhone will go into mass production in India this year and will include newer models.
The government is said to have been pushing Apple to manufacture its entire line-up of smartphones in India, especially the newer ones, since this would help the Make in India initiative win over more investors. Apple is also preparing to set up company-owned retail stores and start direct online sales in India after the government relaxed FDI norms for single-brand retail in August.
Apple’s global suppliers such as Flex Ltd, Salcomp Plc, Sunwoda Electronic Co, CCL Design (Suzhou) and Shenzhen Yuto Packaging Technology Co. have set up base in India and are manufacturing parts and accessories such as chargers and battery packs locally.
Incidentally, the iPhone XR has been Apple’s top-selling smartphone in India in the past six months after prices were cut, helping the company revive flagging sales in the country. The latest iPhone 11series too has sold record numbers in India due to aggressive pricing, industry executives said.
Apple has around 2% share of the overall Indian smartphone market.