Apple slowly adds new components to be manufactured locally in India

Apple has plans to shift 15-30% of its production from China to other countries amid an escalating US-China trade war.

Photo by Remy Loz on Unsplash

In its effort to participate in India’s ambitious ‘Make In India’ campaign, and find an alternate manufacturing hub amid the US-China trade war, Apple has begun sourcing battery packs for its locally made iPhones from American contract manufacturer Flex’s India plant.

“Flex is making battery packs for Apple…supplies have begun for iPhones to be sold in India, and for exports,” a senior industry executive who is aware of its plans told local media Economic Times.

The deal with the India plant of Flex is a new addition to Apple’s other existing partnerships in the country with manufacturers such as Foxconn and Wistron that assemble Indian-made iPhones from separate plants in Chennai and Bengaluru, respectively. Apple already sources phone chargers locally from the Finnish company Salcomp, the largest player globally which has made India a huge base over the past few years.

Neil Shah, director at the Hong Kong-based Counterpoint Research told ET, that although Apple’s plan to source component from India is a positive step, but battery packs contribute little to the value addition in iPhones since it just accounts for about 1% of the value of making the device. Shah believes that only when it starts to locally assemble printed circuit boards—accounting for more than half of the production cost—then a real value can be created from such efforts.

Its plan to locally source different components can also be attributed to its plan to set up its retail store in the country under Single Brand Retail Trade (SBRT), which requires the company to procure all components used in the product to be made in India, irrespective of whether the products are sold in India or exported.

Other smartphone manufacturers such as Samsung, Xiaomi, Oppo, Vivo, and Lava have already started assembling the circuit boards locally over the past few years.

Apple’s market share in India is on the lower side compared to other players, mostly due to its high-priced products (USD 700 to USD 911) compared to the Chinese brands that are in the range of USD 281 to USD 421.

In a move that could possibly hit two birds with one stone–decrease its production cost and move away from China as its current manufacturing hub–Apple has been planning to start mass manufacturing of its latest handsets in India. Apple’s largest smartphone assembler, Foxconn in April said the company is ready to start the trial production of latest iPhones in the country. In March 2019, Wistron started assembling iPhone 7 in Bengaluru.