iPhone exports double to $10 billion, India now tempts component makers | Business news

Apple has also become a major employer, many of them women, at its assembly plants in India. “Apple currently employs 1.5 million people and that number will increase significantly in the future,” Ashwini Vaishnaw, Minister of Electronics and IT, told The Indian Express. Over the next three years, IT ministry officials estimate that the supply chain ecosystem will expand to employ nearly five million people.

The company’s expansion has also seen a number of foreign suppliers set up shop in the country. “Every major entity in the component supply chain ecosystem, be it camera modules, communications, power or digital signal processing, is actively looking to set up a base in India,” Vaishnaw said.

This automatically lends itself to a much better infrastructure in the area. In Sriperumbudur, Apple’s main manufacturing base, about 40 km from the Tamil Nadu capital Chennai, where Foxconn has two large iPhone assembly plants, two huge dormitories, mainly for female workers, are being built, modeled on the Chinese iPhone city of Zhengzhou.

According to a Bloomberg estimate, one in every seven iPhones sold globally in FY24 was made in India. The government expects that a quarter of all iPhones will be made in India by 2028, and some accessories, such as AirPods, will also be assembled in the country. In the next two to three years, Apple plans to increase iPhone production in India to more than 50 million units per year.

While the efficiency of India’s new iPhone unit is not yet on par with factories in China, New Delhi’s unfavorable attitude towards mainland companies and high tariffs on importing parts are also hurdles facing Apple’s suppliers plan a base in India. .

According to Apple’s 2023 supplier list, as many as 157 contractors were producing in mainland China, up from 151 the year before. However, the number of Indian suppliers has remained stable at 14, indicating limited success so far in translating the tech giant’s growing footprint in India and Southeast Asia into reduced dependence on China.

But government subsidies under the production-linked incentive (PLI) program for smartphone production, a deteriorating US-China relationship, and Beijing’s strict Covid-19 measures have all pushed Apple to take a respectable share of iPhone assembly to India.

Apple’s contract manufacturers Foxconn, Pegatron and Wistron (which were acquired by Tata last October) have managed to meet the sales and investment thresholds essential for securing payouts under the PLI scheme. While the government does not share the breakdown of payouts for individual entities, it is believed that the three Apple assemblers along with Samsung and domestic electronics maker Dixon are expected to receive over Rs 4,500 crore for achieving their PLI targets for FY23 .

Foxconn, which has the largest iPhone assembly plant in India, currently employs over 40,000 people at its factories in Tamil Nadu. Pegatron has a relatively smaller facility and employs approximately 10,000 employees. The Winstron factory, recently acquired by Tata, employs 27,000 people.

Apple’s expansion has fueled interest from companies like Google in assembling phones in India; there is also a rise of domestic contract manufacturers – Tata Electronics, Dixon, VVDN and Kaynes have stepped up to handle assembly orders from foreign smartphone makers. India has a large workforce in this category of assembly work, which is relatively simpler than component manufacturing and requires higher skills. “Contract manufacturing is a complex process and requires precision work. In recent years, Indian manufacturers have perfected these processes and are meeting global standards and requirements,” said Vaishnaw.

Besides Foxconn, Pegatron and Tata that assemble iPhones, there are 11 other companies that have set up bases in India to supply various components needed to make the phones.

Foxlink, a subsidiary of Taiwan’s Cheng Uei Precision Industry Co Ltd, based in Andhra Pradesh, makes cables for iPhone chargers. Apple buys batteries from US-based Flex Ltd, which has factories in Pune, Chennai and Bengaluru, among others. China-based Sunwoda Electronic Company Ltd, which has a factory in Uttar Pradesh, is also a battery supplier to Apple. Jabil makes plastic cases and housings for AirPods from its factory in Pune that are shipped to China and Vietnam, where the earphones are ultimately assembled. Apple sources its chargers from China-based Lingyi iTech (Guangdong) Company, which has a factory in Chennai.

Although some foreign suppliers have started manufacturing in India, this number is a fraction compared to Apple’s suppliers in China. The industry believes that India needs to adjust its measures on import tariffs. Earlier this year, the India Cellular and Electronics Association said in a report that India has one of the highest tariff lines for smartphone components – the simple average Most Favored Nation (MFN) tariff for inputs is 8.5 percent, up from 3.7 percent in China.

High import tariffs are typically imposed to give priority to domestic industry, but experts have argued that in the absence of a local industry – as is the case with parts manufacturers in India – such high tax rates deter companies from investing. the country. An IT ministry official said the government is aware of these concerns and the ministry is working with the commerce ministry to reduce or eliminate tariffs on various components.

“Globally, there are two to four tax rates, so it becomes easy to import components, but the number is much higher in India. We are going to harmonize it so that companies don’t have to worry about classification. The reason for increasing rates during the growth phase is that a country wants to develop its own businesses. But the question is that if you want to bring more suppliers to India, we have to have the right mix between high and low tax rates,” the official said.