Is the era of the iPhone about to begin? "made in india"?

() — As Apple looks beyond China In a bid to prevent its crucial supply chains from being disrupted by covid-related lockdowns and rising geopolitical tension, the India it has emerged as an attractive potential alternative to the world’s second largest economy.

And the great regional rival of Beijing is not letting the opportunity pass. One of India’s top ministers said last month that the California-based company wants to increase its production in the South Asian country to a quarter of its grand total.

Trade and Industry Minister Piyush Goyal said Apple already makes 5-7% of its products in India. “If I’m not mistaken, your goal is to reach 25% of your production,” he declared in a act celebrated in January.

His comments come at a time when Foxconn, one of Apple’s main suppliers, wants to expand its operations in India after experiencing severe supply disruptions in China.

During years, Apple has relied on a vast manufacturing network in China to mass-produce iPhones, iPads and other popular products. But its reliance on the country was tested last year by Beijing’s strict “zero-covid” strategy, which was swiftly dismantled last December.

Since the middle of last year, Apple has redoubled its efforts to invest in India. But can Asia’s third-largest economy deliver what was promised?

“In theory, it can be done, but it won’t happen overnight,” says Tarun Pathak, director of research at market research firm Counterpoint.

“The dependence [de Apple] of China is the result of nearly two and a half decades in which China has developed its entire electronics manufacturing ecosystem,” Pathak said, adding that the company makes almost 95% of its phones in China.

Apple did not respond to ‘s requests for comment.

Headaches mount for China

But the world’s most valuable company this month posted benefits surprisingly weak, partly because of its recent troubles in China. The problems started in Octoberwhen workers began fleeing the world’s largest iPhone factory, run by Foxconn, due to a covid outbreak.

Faced with a lack of staff, Foxconn offered bonuses to workers to return. But protests broke out in November, when newly hired staff said management had broken their promises. The workers confronted the security agents, before the company ended up offering them cash to leave the premises.

Although operations at the sprawling Zhengzhou campus in central China have already returned to normalsupply problems affected the supply of the iPhone 14 Pro and iPhone 14 Pro Max models during the key holiday shopping season.

Foxconn did not respond to a request for comment.

Furthermore, the relationships between United States and China They are getting more and more tense. Last year, the Joe Biden government banned Chinese companies buy advanced chips and license-free chip manufacturing equipment.

“I think they will continue to depend on China for a significant part of their production,” says Willy Shih, a professor at Harvard Business School, referring to Apple.

“But what they’re trying to do, and I think it makes sense, is to diversify their supply base so that if something goes wrong in China, they have some alternatives.”

Shih referred to this strategy as “China +1 or China+ more than one.”

China+1=India?

“India is a very interesting market for us and one of our main targets,” Apple CEO Tim Cook said at a recent earnings call.

“Regarding the business in India, we have broken a quarterly revenue record and posted strong double-digit year-on-year growth,” he added.

India will overcome to China this year and it will become the most populous country in the world. The country’s huge and cheap labor force, which includes workers with key technical skills, is a big draw for manufacturers.

Asia’s third largest economy also offers a growing domestic market. In 2023, as fears of a global recession persist, India is expected to remain the world’s fastest growing large economy.

If you can keep up that momentum, India could become the third country with a GDP of US$10 trillion in 2035according to the Center for Economic and Business Research.

Analysts say India’s growing consumer base could give it an edge over Vietnamwhich has also attracted increased investment in electronics manufacturing.

The Government of India has launched policies to attract investment in the manufacture of mobile phones. According to Counterpoint’s Pathak, India accounts for 16% of global smartphone production, while China accounts for 70%.

There are already some success stories: Samsung, the world’s best-selling smartphone brand, is one step ahead of Apple and already makes many of its phones in India.

The giant South Korean it has been diversifying outside of China due to rising labor costs and also due to stiff local competition from domestic companies such as Huawei, Oppo, Vivo and Xiaomi.

It now makes most of its phones in Vietnam and India, with the latter accounting for 20% of Samsung’s global output.

In 2018, Samsung opened what it called “the world’s largest mobile factory” in Noida, a city near New Delhi, and analysts say the company may have paved the way for other manufacturers.

Apple devices are made in India by Taiwan’s Foxconn, Wistron and Pegatron. Until recently, the company used to start assembling models in the country only seven or eight months later of its release. That changed last year, when Apple began manufacturing the new iPhone 14s in India weeks after they went on sale.

Some of Apple’s biggest contractors are already investing more money in India. Last year, Foxconn announced that it had invested $500 million in its Indian subsidiary.

Earlier this week, the government of the southern Indian state of Karnataka stated that it is “seriously discussing investment plans” with the Taiwanese giant. Foxconn already has factories in Andhra Pradesh and Tamil Nadu.

Where is the Indian Shenzhen?

However, the Indian manufacturing industry is facing numerous challenges. It only makes up 14% of India’s GDP, according to the World Bank, and the government has struggled to increase that number.

“One of the things that China did was build infrastructure when it could. And I would say that India didn’t build infrastructure when it could,” Shih said, referring to highways, ports and transport links that facilitate the movement of goods.

Apple will also face a lot more red tape in India if it wants to create sprawling Chinese-style campuses.

An employee tests an iPhone camera at Foxconn Technology Co., in Sri City, Andhra Pradesh, India. (Karen Dias/Bloomberg/Getty Images)

“Will India be able to replicate the Shenzhen version?” Pathak wonders, referring to the Chinese manufacturing hub. Building these “hotspots” will not be easy and will require India to reflect on issues ranging from logistics and infrastructure to the availability of workers, he added.

The experts they pointed to that access to land in a chaotic democracy like India could be a challenge, while the Chinese Communist Party faces fewer barriers to quickly expropriate real estate for causes it considers important.

India would also have to think about going beyond just assembling iPhones through favorable government policies.

“You have to source components locally, which means you have to attract a lot more companies in the supply chain to set up shop in India,” says Pathak.

Some of India’s biggest companies may be stepping up. According to Bloombergthe Tata Group automobile conglomerate is in talks with Wistron to take over the Taiwanese company’s factory in South India.

Tata and Wistron did not respond to a request for comment.

“I’m not directly involved in it, but it should be really good for India, because it’s going to create an opportunity in India to make electronics and microelectronics,” told Bloomberg N. Ganapathy Subramaniam, COO of Tata Consultancy Services, the group’s software services arm.

While there are significant hurdles in India’s ambition to deepen its relationship with Apple, doing so would be a huge boost for the country and for Prime Minister Narendra Modi.

“I think it would be [una] big, big win,” Pathak said, noting that growing manufacturing ties with an American giant like Apple will in turn attract other global players in the electronics manufacturing ecosystem to India. “If you focus on the big the others will follow.”

Catherine Thorbecke and Juliana Liu have contributed to this article.