Apple’s Complex, Secretive Gamble to Move Beyond China
Its most ambitious plans are for India, where it will work with a swath of partners to make iPhones, AirPods, and Apple Pencils, as well as components for the Apple Watch, iPad, and Mac. Apple has already tapped three of its main assembly partners from Taiwan to build devices in India: Foxconn, Pegatron, and Wistron.
Introduction:
In the fast-paced world of technology, innovation, and adaptability are key to staying ahead. In 2020, Apple, the tech giant renowned for its iconic iPhones, embarked on a mission to reduce its dependence on China. And now, in an unexpected twist, Apple has joined forces with Tata Group to manufacture iPhones in India for the world. This partnership is a game-changer, making Tata Group one of Apple’s only four global manufacturers. Let’s delve into the fascinating details of this collaboration and explore why it’s a significant step for both Apple and India.
1. Breaking the Shackles of Dependency:
1.1 The Shift from China:
Back in 2001, Apple’s late visionary, Steve Jobs, decided to transfer its manufacturing operations to China. China offered numerous advantages, including a well-developed and integrated supply chain ecosystem, scale and capacity, proximity to other suppliers, and easy accessibility to the largest market in the world.
1.2 Risks of Over-Dependency:
However, over time, Apple’s heavy reliance on China began to pose several risks. Geopolitical tensions between the US and China, the increasing threat to intellectual property, and supply chain disruptions due to natural disasters had a significant impact on Apple’s operations and profitability. Additionally, Apple’s association with China’s controversial labor practices tarnished its brand equity and reputation.
2. Diversifying Manufacturing Operations:
2.1 Exploring Southeast Asia:
To mitigate risks and reduce dependency, Apple started diversifying its manufacturing operations across several nations. It expanded its manufacturing business to Southeast Asian countries such as Thailand, Vietnam, and the Philippines. However, its primary interest lay in the vast potential of the Indian market.
2.2 The Promise of India:
India, home to 1.42 billion mobile phone users, stands as the world’s second-largest smartphone market after China. Furthermore, the domestic demand for consumer electronics is experiencing significant growth, projected to reach $21.18 billion by 2025 from $9.8 billion in 2021.
2.3 Tapping into India’s Potential:
Apple conducted extensive research on the Indian market and concluded that the country offered immense potential for aspirational goods. The expanding middle class in India presented ample room for growth. However, Android devices, spearheaded by Samsung and Chinese brands, dominate the Indian market due to their comparatively lower prices. To establish a stronger foothold, Apple recognized the need to bring down the cost of iPhones and other products by establishing more manufacturing units in India.
3. Tata Group: Apple’s Indian Partner:
3.1 The Fourth Contract Manufacturer:
Apple’s quest to increase its manufacturing presence in India led to its collaboration with Tata Group, making them the fourth contract manufacturer after China-based Foxconn, Wistron, and Pegatron. This partnership holds tremendous significance for both Apple and India.
3.2 India’s Advancement towards Self-Reliance:
India has taken significant strides towards becoming self-reliant in terms of electronics manufacturing, acting as a catalyst for Apple’s interest in the country. The Indian government has introduced various schemes and incentives to fast-track the manufacturing process and develop the necessary infrastructure.
4. Incentives Driving India’s Manufacturing Hub:
4.1 The PLI Schemes:
To boost large-scale electronics manufacturing, the Indian government launched two rounds of the Production-Linked Incentive (PLI) scheme. The first round, initiated in 2020, offered eligible companies incentives of 6–4% on incremental sales. The second round, launched in 2021, targeted electronic components and provided incentives of 5–3% for four years.
4.2 Supporting IT Hardware:
The government also introduced a PLI scheme for IT hardware in 2021, incentivizing the production of laptops, tablets, PCs, and servers. This scheme witnessed increased production and investments in the IT hardware segment.
4.3 Promoting Electronic Components and Semiconductors:
The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) offers incentives of 25% on capital expenditure for electronic components like semiconductors. This scheme facilitates capacity expansion and diversification of existing manufacturing units.
4.4 Boosting Infrastructure:
Under the Modified Electronic Manufacturing Clusters (EMC 2.0) Scheme, the government provides financial assistance to establish world-class infrastructure by offering common facilities and amenities. This initiative aims to enhance the manufacturing ecosystem.
4.5 Nurturing Innovation and Export:
The government has set up Special Economic Zones (SEZs) to facilitate export-oriented manufacturing and trading. The Electronics Development Fund (EDF) provides risk capital to startups and companies developing new technologies. Other initiatives, such as the Phased Manufacturing Program (PMP) and tariff structure rationalization, further promote domestic manufacturing of electronic goods.
Conclusion:
India’s collaboration with Apple through the partnership with Tata Group marks a significant milestone in the country’s journey towards becoming a global electronics manufacturing hub. With India’s massive market potential, burgeoning middle class, and the government’s unwavering support through various schemes and incentives, the stage is set for Apple to leverage the Indian market’s growth. As Apple aspires to increase India’s contribution to its production from 5–7% to 25%, the future holds exciting prospects for both Apple and India’s thriving electronics manufacturing industry.
