The biggest manufacturer of iPhones is shifting production to India, Bloomberg reports. Foxconn plans to invest about USD 300 million to build manufacturing plants for Apple, with more funds planned as capacity expands. The factories will be ready for Apple’s next iPhone launch in September.
How this will impact Apple’s and Foxconn’s operations in China is unclear. The country has long been Apple’s primary manufacturing base, where Foxconn’s biggest facilities, as well as hundreds of other supply-partners, are located.
Foxconn is reportedly China’s largest single employer, with a headcount topping 1.3 million people in 2017. That year, nearly half of Apple’s iPhones were said to be built at a Foxconn plant in Zhengzhou, central China, where 350,000 workers across 94 assembly lines produced as many as 500,000 iPhones per day.
Shifting production to India would reduce Foxconn’s and Apple’s reliance on China amid ongoing trade tensions and rising labor costs. Last month, the company said it would complete construction of a factory in Wisconsin, USA, in 2020, and is considering relocating some plants to Taiwan. Foxconn already has two plants making devices for Xiaomi and Nokia in the south Indian states of Andhra Pradesh and Tamil Nadu.
Setting up in India would better enable Foxconn and Apple to capitalize on the world’s second-largest and fastest-growing smartphone market, where 142.2 million units shipped last year, up by 14.5% from 2017.
Apple had a paltry 1.2% market share in India at the end of 2018 as sales halved to 1.7 million units, with high iPhone prices weighing it down. Xiaomi and Samsung lead the market with 28.9% and 22.4% market share, respectively, according to IDC estimates, and the former recently poured USD 500 million into India.
Manufacturing in India would let Apple skirt import duties of 20% and compete better on prices with its rivals. At the moment, it is the only major smartphone player that does not manufacture in India, with the exception of older iPhone models that were built in southern India’s Bangalore for several years.
Furthermore, meeting a 30% local sourcing threshold would allow Apple to open its own retail stores in India. On top of boosting sales opportunities, Apple Stores would address the company’s repair problem in India, whereby customers are forced to resort to less-than-perfect, third-party fixes.
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