Neil Hughes
Apple manufacturing partner Foxconn is reportedly in talks to open a new iPhone assembly plant in India, potentially allowing the handset to achieve lower prices and boost sales in the growing market.
In addition to iPhones, Foxconn is also said to be looking to build iPads and iPods in India, for both local and international sales, according to Reuters. Details on Foxconn's alleged plans were shared by Subhash Desai, Industries Minister of the state of Maharashtra in India.
Publicly, Foxconn has said it plans to build up to a dozen facilities in India by the year 2020. But on the subject of an Apple-specific plant in the nation of over a billion people, the manufacturer declined to comment.
Foxconn has historically built devices in China, but in recent years has shown interest in strategically expanding around the world, to better serve certain markets. For example, the company expanded to Brazil in 2011 and does build some iPhones there, though ramp-up in the South American country has been slower than anticipated.
An expansion to India would be a key strategic move for both Apple and Foxconn, allowing the companies to offset rising wages in China. With lower production costs, Apple could also get more aggressive with iPhone pricing in the country, where it trails behind South Korea's Samsung and local Indian manufacturers like Micromax.
In recent years, Apple has boosted sales in India through a variety of different strategies, including payment plans to mitigate the up-front costs of buying an iPhone, as well as partnering with resellers for retail storefronts. The debut of the larger-screened iPhone 6 and iPhone 6 Plus are also said to have boosted interest in India, though costs are believed to remain a prohibitive factor.
Despite a population that tops 1.2 billion, India remains one of the poorest countries in the world — its nominal per-capita GDP of just $1,509 is far below China's $6,959 and barely outpaces that of war-torn nations like South Sudan, according to data from the International Monetary Fund.
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20 Comments
Apart from sales opportunities, any reduction in China's leverage over Apple is a welcome development.
This article is misleading about important economic numbers: India's per capita/PPP was revised by IMF recently @ $5427.7 in 2013 and growing at 10.7% (which BTW outpaces China by 2.9%). Link: http://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD Also, India's GDP is en route to outpace china by end of 2015. So, No. India's GDP isn't close to worn-torn countries, its beating Apple's favorite country China as far as growth is concerned.
I admit I don't understand the costs of their supply chain, but if final assembly takes place in India, assuming labor costs are similar to China's, where does cost savings take place? I assume there is a cost reduction in shipping to customers (or resellers in local markets in India). The parts and materials entering the factory still come from their manufacturing sources, presumably in China, Korea, maybe Japan.
I admit I don't understand the costs of their supply chain, but if final assembly takes place in India, assuming labor costs are similar to China's, where does cost savings take place? I assume there is a cost reduction in shipping to customers (or resellers in local markets in India). The parts and materials entering the factory still come from their manufacturing sources, presumably in China, Korea, maybe Japan.
Labor costs are lower than China's. In any country or region, once businesses mature, economies improve or inflation takes hold, wages naturally go up. Manufacturing will almost always follow to where labor costs are lowest, providing it doesn't also raise transportation costs. I think many companies will move from China to India and 20 years from now will probably move from India to African countries, at least those where there's political stability (Tanzania is a possibility). And as manufacturing becomes more automated (current iPhone production doesn't seem to be much automated), it won't matter where a company manufactures - it could even come back to the U.S. if there aren't high labor costs.
Another approach and the one that I believe is the most ethical is that you manufacture where your markets are so that the economies who are your customers also benefit from the jobs and associated business investment. And Apple's volumes are so high, they might be one of the few companies where it makes sense to do this. This is especially true if they start making different models for different markets - i.e. a much lower priced model for the Indian and/or African markets.
Personally, if Apple does build a plant in India, I would have preferred to have seen it built by someone other than Foxconn. I don't like seeing Apple place all their eggs in one basket.
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Personally, if Apple does build a plant in India, I would have preferred to have seen it built by someone other than Foxconn. I don't like seeing Apple place all their eggs in one basket.
Very good point. Do we know if Apple has some other contract manufacturer? I am sure Apple is not foolish enough not to do that - Having a secondary CM also allows them to have some negotiating powers too.