Apple started assembling some of its devices in India and Vietnam a few years ago, slowly reducing its dependence on China. The Cupertino giant is now preparing to turn the two nations into major global manufacturing hubs, according to analysts at JP Morgan.
In a report they sent to customers on Wednesday, analysts at JP Morgan said Apple will shift 5% of global iPhone 14 production to India by the end of 2022 and expand its manufacturing capacity in the country to add 25% of all iPhones by 2025 to produce.
Vietnam, on the other hand, will contribute 20% of all iPad and Apple Watch production, 5% of MacBooks, and 65% of AirPods by 2025, according to the report, which was reviewed by TechCrunch.
India has attracted investment from Foxconn and Wistron in recent years by offering lucrative subsidies, while New Delhi is relocating to turn the country into a manufacturing hub. The presence of the foreign manufacturing giants, coupled with an “abundant labor force and competitive labor costs” make India a desirable location, according to the analysts.
Apple competitor Samsung identifies India as a key global manufacturing hub and has built one of its largest factories in the country. The currently market-leading Chinese smartphone maker Xiaomi, as well as its competitors Oppo, Vivo and OnePlus, also manufacture a number of their mobile phones locally in the country.
Google is also planning to move some of its Pixel smartphone production to India, The Information recently reported. The company, which has skipped shipping of flagship models in India for two generations, said on Wednesday that it will launch upcoming Pixel 7 models in India.
Despite Apple’s tiny market share in India, the iPhone maker has expanded its investments in the country over the past five years. The company launched its online Apple Store in the country two years ago and has publicly announced that it is working on opening its first physical store in the country.
Foxconn currently has over 20,000 operators at its iPhone assembly shop in India, compared to 350,000 in China, analysts estimated.
“The Indian iPhone supply chain has historically only delivered legacy models. Interestingly, Apple has required EMS providers to manufacture iPhone 14/14 Plus models in India in Q4 22 within two to three months of starting production in mainland China. The much shorter interval implies the increasing importance of Indian manufacturing and likely higher iPhone allocations for Indian manufacturing going forward,” the report added.
“We believe that due to the more complex alignment of iPhone Pro series camera modules (performed by EMS providers) and higher local market demand for iPhone 14 series (tax savings), Apple will continue to produce only iPhone 14/14 Plus models in India . We expect Q4 22 volume to start small (~1M units per month or 5% of total iPhone volume).”
“In the short term,” China and Taiwan will continue to gain market share due to better cost structures, analysts say.
“Taiwanese EMS vendors, particularly Pegatron and Wistron, are more selective and prioritize profitability while focusing on new areas such as electric vehicles and servers. Hon Hai remains a primary EMS partner for iPhones and should benefit from the move to India,” the report said.
“The manufacturing share in mainland China should shift towards local suppliers, while Taiwanese EMS have an advantage in India. In Vietnam, we expect the share to be shared between Taiwanese and mainland China EMS.”