**London**: Apple is increasingly shifting its supply chain to India to reduce reliance on China amid geopolitical tensions. Despite obstacles like high-tech export restrictions from China, India is making strides to facilitate Apple’s expansion, aiming for significant growth in iPhone production by 2025.
Apple is currently engaged in a significant effort to diversify its supply chain away from a predominantly China-centric model, with India emerging as a key player in this strategy. This transition, which carries implications for manufacturing dynamics in both countries, has raised concerns within China regarding potential economic repercussions.
The Financial Times outlines the challenges that Apple is facing as it shifts production lines to India. Factors contributing to these difficulties include the tense political relationship between China and India, with officials reportedly substituting the company name for “the fruit company” in sensitive discussions to avoid drawing attention. Both Karnataka and Tamil Nadu officials are engaging in discreet discussions as part of this transition.
China’s apprehensions are evident as it seeks to protect its manufacturing dominance. In January, reports surfaced indicating China’s crackdown on the export of essential materials and high-tech equipment, both of which are critical for Apple’s production. This action includes stalling the movement of Chinese technicians to India, aimed at preventing the transfer of skills and knowledge that could bolster India’s capabilities.
Despite these challenges, India’s government has taken steps to facilitate Apple’s operations, implementing measures such as the Production-Linked Incentive programme, which allocates billions to support Apple’s ambitions. Furthermore, India has relaxed restrictions on Apple’s operations, allowing the company to open its first-party stores. Concurrently, Indian officials have actively courted Apple suppliers, including multiple visits to Taiwan to attract firms like Wistron and Foxconn. These efforts have resulted in substantial cooperation, including the involvement of major Indian conglomerate Tata in Apple’s production processes.
Looking ahead, projections indicate that India could contribute over 20% of the global iPhone output by 2025. However, barriers remain, including visa restrictions affecting Chinese citizens and societal pressures that hinder women’s participation in the workforce.
Apple’s expansion into India and other countries, such as Vietnam, is driven primarily by a desire to mitigate risks associated with its previously concentrated supply chain in China. The COVID-19 pandemic exposed vulnerabilities in Apple’s manufacturing process when lockdowns at factories significantly disrupted production. This realisation has led Apple to seek greater geographical diversity in its manufacturing locations to alleviate dependency on any single country.
Geopolitical tensions, particularly noted during the US-China trade war, have further prompted Apple to reassess its production strategy to avoid potential trade barriers. The company navigated these tensions successfully in the past, primarily due to negotiations between CEO Tim Cook and former President Donald Trump. By bolstering production capabilities in countries outside China, Apple could potentially sidestep tariffs that would have impacted its Chinese manufacturing significantly.
In response to these evolving dynamics, India is also preparing to reduce import taxes on components and accessories for Apple and other firms, enhancing the attractiveness of India as a manufacturing hub. As Apple endeavours to solidify its production foothold in India while countering resistance from China, the tech giant continues to explore pathways to decentralise its supply chain in a bid to mitigate risks associated with concentrated manufacturing operations.
Source: Noah Wire Services
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