Tech giant Apple is expected to shift over 18% of its worldwide production of iPhones to India by the fiscal year 2024-25 (FY25), riding on the wave of the Centre’s production-linked incentive (PLI) scheme, as stated in a report by the Bank of America. This comes after India’s share in global iPhone production was recorded at 7% in FY23, a significant increase compared to negligible numbers before the implementation of the PLI scheme on October 6, 2020. To support its expansion plans, Apple’s contract manufacturers in India, namely Foxconn Hon Hai, Wistron, and Pegatron, have already received approval from the Centre.
The Bank of America report suggests that India’s contribution to iPhone manufacturing may witness further growth if Apple incentivizes its large-scale vendors to expand operations within the country. By improving the affordability of locally made iPhones and focusing on premium products, Apple could potentially gain a larger market share (currently at 4%) in India’s mobile phone market. The report predicts that India could account for over 5% of Apple’s global iPhone sales by the calendar year 2025 (CY25), with a projected compound annual growth rate (CAGR) of 21% over CY22-25.
At present, Apple has 14 vendors in India, compared to 151 in China. The majority of these vendors are located in southern India, in close proximity to the contract manufacturers, Foxconn and Pegatron in Tamil Nadu, and Wistron in Karnataka.
The report highlights that the PLI scheme has already shown positive results within two years, with iPhone exports from India reaching Rs 40,000 crore in FY23, compared to Rs 11,000 crore in FY22. This growth is expected to accelerate further as monthly exports have already reached a run-rate of $1 billion since February this year. The PLI scheme, valued at Rs 38,000 crore, has not only facilitated increased exports but has also improved the export mix in local production from 16% to 25%. This significant progress positions India as a credible global supply chain alternative for mobile phones and electronics.
Moreover, Apple’s decision to manufacture its latest iPhones in India indicates a growing confidence in the country’s potential as a major manufacturing destination. By diversifying manufacturing outside of China, Apple aims to mitigate risks and tap into India’s vast market. The report emphasizes that mobile phones account for 21.5% of India’s domestic electronics demand and are witnessing a compounded annual growth rate of 15%. The production and export of mobile phones have experienced a remarkable growth of 3.9 times and 65 times respectively since FY17, while imports have significantly reduced to a third, according to the report.
The Bank of America’s analysis also points out that localizing 70% of a mobile phone’s cost, which includes components like display, memory, and other semiconductors, poses challenges in the near term. The localization process requires substantial capital expenditure and advanced technology.
In conclusion, Apple’s decision to shift a substantial portion of its global iPhone production to India reflects the country’s growing prominence as a manufacturing hub. With the support of the PLI scheme and the potential for further expansion, India is poised to become a significant contributor to Apple’s global iPhone sales. The success of the PLI scheme in boosting iPhone exports and enhancing the local production ecosystem highlights India’s ability to establish itself as a credible alternative in the global supply chain for mobile phones and electronics.
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