Apple’s supply chain is uncoupling from China, but there are still many problems to resolve.
With Apple pushing partners hard to set up shop elsewhere, the decoupling of the iPhone maker’s supply chain from China is accelerating.
Silk Road travels the tech industry
Hon Hai Precision Industry/Foxconn is Apple’s biggest partner and is planning an investment of $700 million in a new plant in India to boost production.
It will be built on a huge 300-acre site near the airport in Bengaluru, Karnataka, and will create around 100,000 jobs, compared with Apple’s main iPhone factory in China, which employs 200,000. Foxconn has also committed to building another factory in a neighboring state.
Since earlier reports put India’s iPhone production at 25%, expect more investments of this kind. Apple’s contract manufacturers export more than $2.5 billion worth of iPhones from India.
There have been dozens of accounts of Apple’s partners setting up shop in India, years of Apple’s efforts to get business going in India, and the appearance of some big names from India’s manufacturing industry in the Apple supply chain that led to the decision.
This is something Apple is pushing for
Foxconn announced a $300 million investment in Vietnam recently, as did GoerTek, which makes AirPods.
“We receive requests from our clients almost every month asking if we plan to expand to India.” said Kazuyoshi Yoshinaga, Deputy Chairman of GoerTek.
Given Apple’s Indian-bound supply chain, it’s not hard to speculate who the client is.
I have been following Apple’s India journey since the beginning. The nation offers a lot, but there are numerous challenges to overcome before Apple’s ambition is realized.
Opportunities and challenges
Although the government has made big changes over the past few years, regional problems remain. India is bureaucratically complex.
As a result, manufacturing has traditionally been hampered, but India is now offering financial incentives to attract large manufacturers to set up shop there.
It has many advantages that could make it a tech industry powerhouse.
Despite not always being in sync with the West, India is an English-speaking democracy. In addition to English, the nation has dozens of other languages spoken in addition to a caste-based class system that challenges management and diversity.
Aside from its large population, it also has a great advantage — its population trends young. As many nations face the challenges of aging demographics – including China – the National Bureau of Statistics reports a population decline of 850,000 in 2022. But what’s even worse is that hiring them becomes more expensive as the number of available people declines. And that’s before we consider COVID-19’s calamitous human cost.
Complicated regional issues
A further challenge Apple and its partners face is India’s tariff system. Not all components can be made in India, and finding an equitable tariff arrangement is another challenge, particularly when it comes to regional agreements.
It is also possible for infrastructure – energy, communications, roads, and rail – to become a problem, particularly when intra-regional rivalries are at play.
Apple might want to build a road between two regions, and even be willing to pay for it, but the project won’t move forward without permits, which may explain Foxconn’s decision to build near the airport.
All children should have access to education?
We know India has a great education system. Just look at the list of Indian-origin CEOs, including Sundar Pichai at Alphabet and Satya Nadella at Microsoft. Getting high-placed, highly effective leaders doesn’t take much digging — but factories also need educated workers.
Education in India is not equally distributed, unlike in China. Compare literacy rates: 74% in India versus around 97% in China.
To find the quality and quantity of workers Apple needs, its supply chain will need to raise a few boats. A combination of high quality education on-site and extensive automation of the production line will be necessary to achieve this.
Control of quality
We know Apple takes quality control seriously because its customers expect high-quality devices. Apple’s customers are discerning.
As early as the pandemic began, we learned that the company was sending staff to China on around 50 flights a day in order to maintain quality control. In a recent Bloomberg report, a manufacturer complained that iPhone production required 12 times more quality control staff than Android.
The recent fire at Foxlink was caused by failures in fire control systems, which is why it got out of hand. Increasing standards while Apple and its supply chain do business in India clearly raises problems. In addition, we heard that Apple rejected almost half the production produced by one Indian partner because it did not meet standards.
In the aftermath of the pandemic, some quality control systems may have also been replaced by automation, telepresence, and remote collaboration. My prediction is that these challenges will be partly addressed by increasing automation in India. Foxconn already operates “lights out” factories, for which it has won awards.
Next steps?
Is it possible for Apple or any other tech company to base production in India successfully?
It will get there eventually. Also, I suspect Apple wants a critical mass of its manufacturing partners to be located there so that it can gain a stronger voice when dealing with administrative and bureaucratic challenges as a group.
The nation will also benefit from Apple investments, such as clean power production and advanced manufacturing support. (As I write this, Apple in India has announced a partnership with NGO Frank Water to improve water management in Bengalaru.)
Apple is not about to give up on its goal of building a 100% carbon neutral supply chain, even in the face of the complexity of migrating its supply chain to a new continent. Getting there will take time, commitment, and a lot of lateral thinking.
India is becoming an increasingly important part of Apple’s supply chain
Apple’s supply chain is uncoupling from China, but there are still many problems to resolve.
With Apple pushing partners hard to set up shop elsewhere, the decoupling of the iPhone maker’s supply chain from China is accelerating.
Silk Road travels the tech industry
Hon Hai Precision Industry/Foxconn is Apple’s biggest partner and is planning an investment of $700 million in a new plant in India to boost production.
It will be built on a huge 300-acre site near the airport in Bengaluru, Karnataka, and will create around 100,000 jobs, compared with Apple’s main iPhone factory in China, which employs 200,000. Foxconn has also committed to building another factory in a neighboring state.
Since earlier reports put India’s iPhone production at 25%, expect more investments of this kind. Apple’s contract manufacturers export more than $2.5 billion worth of iPhones from India.
There have been dozens of accounts of Apple’s partners setting up shop in India, years of Apple’s efforts to get business going in India, and the appearance of some big names from India’s manufacturing industry in the Apple supply chain that led to the decision.
This is something Apple is pushing for
Foxconn announced a $300 million investment in Vietnam recently, as did GoerTek, which makes AirPods.
“We receive requests from our clients almost every month asking if we plan to expand to India.” said Kazuyoshi Yoshinaga, Deputy Chairman of GoerTek.
Given Apple’s Indian-bound supply chain, it’s not hard to speculate who the client is.
I have been following Apple’s India journey since the beginning. The nation offers a lot, but there are numerous challenges to overcome before Apple’s ambition is realized.
Opportunities and challenges
Although the government has made big changes over the past few years, regional problems remain. India is bureaucratically complex.
As a result, manufacturing has traditionally been hampered, but India is now offering financial incentives to attract large manufacturers to set up shop there.
It has many advantages that could make it a tech industry powerhouse.
Despite not always being in sync with the West, India is an English-speaking democracy. In addition to English, the nation has dozens of other languages spoken in addition to a caste-based class system that challenges management and diversity.
Aside from its large population, it also has a great advantage — its population trends young. As many nations face the challenges of aging demographics – including China – the National Bureau of Statistics reports a population decline of 850,000 in 2022. But what’s even worse is that hiring them becomes more expensive as the number of available people declines. And that’s before we consider COVID-19’s calamitous human cost.
Complicated regional issues
A further challenge Apple and its partners face is India’s tariff system. Not all components can be made in India, and finding an equitable tariff arrangement is another challenge, particularly when it comes to regional agreements.
It is also possible for infrastructure – energy, communications, roads, and rail – to become a problem, particularly when intra-regional rivalries are at play.
Apple might want to build a road between two regions, and even be willing to pay for it, but the project won’t move forward without permits, which may explain Foxconn’s decision to build near the airport.
All children should have access to education?
We know India has a great education system. Just look at the list of Indian-origin CEOs, including Sundar Pichai at Alphabet and Satya Nadella at Microsoft. Getting high-placed, highly effective leaders doesn’t take much digging — but factories also need educated workers.
Education in India is not equally distributed, unlike in China. Compare literacy rates: 74% in India versus around 97% in China.
To find the quality and quantity of workers Apple needs, its supply chain will need to raise a few boats. A combination of high quality education on-site and extensive automation of the production line will be necessary to achieve this.
Control of quality
We know Apple takes quality control seriously because its customers expect high-quality devices. Apple’s customers are discerning.
As early as the pandemic began, we learned that the company was sending staff to China on around 50 flights a day in order to maintain quality control. In a recent Bloomberg report, a manufacturer complained that iPhone production required 12 times more quality control staff than Android.
The recent fire at Foxlink was caused by failures in fire control systems, which is why it got out of hand. Increasing standards while Apple and its supply chain do business in India clearly raises problems. In addition, we heard that Apple rejected almost half the production produced by one Indian partner because it did not meet standards.
In the aftermath of the pandemic, some quality control systems may have also been replaced by automation, telepresence, and remote collaboration. My prediction is that these challenges will be partly addressed by increasing automation in India. Foxconn already operates “lights out” factories, for which it has won awards.
Next steps?
Is it possible for Apple or any other tech company to base production in India successfully?
It will get there eventually. Also, I suspect Apple wants a critical mass of its manufacturing partners to be located there so that it can gain a stronger voice when dealing with administrative and bureaucratic challenges as a group.
The nation will also benefit from Apple investments, such as clean power production and advanced manufacturing support. (As I write this, Apple in India has announced a partnership with NGO Frank Water to improve water management in Bengalaru.)
Apple is not about to give up on its goal of building a 100% carbon neutral supply chain, even in the face of the complexity of migrating its supply chain to a new continent. Getting there will take time, commitment, and a lot of lateral thinking.
