Apple’s disenchantment and subsequent decoupling from China continues. For the first time, these devices will be produced in India, further adding to India’s stature of being a key player in the global supply chains.
The decision comes in the wake of Apple’s diversification move from China and to immune the supply chain from sudden disruptions ordered by Beijing.
The production is expected to begin as early as 2023. In New Delhi, the focus of the Modi government has been on getting more companies to India, especially electronics.
Between 2016 and 2021, India’s share in the global production of feature phones and smartphones went from 9 per cent to 16 per cent. However, this is expected to rise.
The tax breaks, in the form of Production Linked Incentive (PLIs) schemes, have also upped the ante, with India planning to spend as much as $30 billion to get more producers to India.
Foxconn, as per a report, is already preparing to initiate production in India while one of its competitors, Luxshare Precision Industry will gradually move its operations. Currently, Luxhshare focuses mainly on Vietnam.
AirPods were the first casualty in the US-China trade war, back in 2019, when their production shifted outside China to Vietnam. In terms of numbers, over 70 million AirPods are shipped each year.
Beats, another acoustics company, owned by Apple, deals in similar products but at a lower price range.
Apple, amongst other companies, may not want to move away from China completely, but they no longer see it as the primary investment destination it once was.
At the beginning of September, as many as 300 million people or 20 per cent of China’s population were under some sort of Covid-zero lockdown across 40-odd cities.
The Covid-zero lockdowns, across 2022, have not only dented the domestic economy but also made companies wary about putting all their production eggs in one basket.
In September, Chengdu, a city of more than 20 million people, was put under lockdown. New curfew restrictions were announced for Shenzhen, a prominent manufacturing hub, and the northern port of Dalian.
Chengdu is home to the manufacturing plants of Toyota and Apple. The seven-day average for Covid-19 cases that week was slightly over 1,900.
In China, more than 3,200 locations are now tagged as ‘medium to high risk’, with some Covid-19 restrictions in place. On 1 August, the number was a little less than 1,100.
The sales have also been hit in 2022, forcing companies like Apple to explore other emerging markets. In the first half of 2022, China’s retail sales of home appliances have come down by 10 per cent year-on-year.
For manufacturers, inventory turnover periods have now increased between 25 per cent and 50 per cent.
For most retailers, the pre-2010 boom, where the annual growth exceeded 10 per cent, is now history. Further, the slowdown in the real estate market has dented growth and purchasing power.
Apple has been a trusted partner of China, indicating Tim Cook’s great success in navigating between the two superpowers. In late 2021, Apple’s $275 billion investment in China made the news.
In 2016, to contain the political fallout in China, Apple pledged to help Chinese manufacturers develop advanced production technologies and cultivation of Chinese talent.
The deal also stressed sourcing more components from Chinese suppliers, increasing the deal size with Chinese software firms, and further investments in Chinese companies.
However, even Apple now appears worried about the economic transformation in China.
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