Cell Phone Manufacturing Takes Off in India

Cell phone manufacture is taking off in India. Photo: Pixel.

Apple’s Diversification Strategy

Apple’s release this month of its latest iPhone model 16, new Apple Watch, and AirPods, is creating a buzz among consumers who love new products, but what they may have noticed is that the iPhone Pro model bears a label saying “Made in India.”

India’s Advantage

India has been receptive to investments and promoted efforts to attract business from large multinational companies. Apple is not the only global corporation seeking to diversify production away from China, and India is moving up the ranks as a price competitive place to assemble complex electronic devices.

Apple’s History in India

Apple first began making iPhones in India in 2017, beginning with the iPhone SE. The move signaled Apple’s intent to diversify its supply chains away from China, a move that other tech conglomerates, such as Microsoft and Amazon, made as well, shifting manufacturing away from China to countries such as India and Vietnam.

COVID-19 Pandemic’s Impact

Apple’s supply chain diversification gained steam during the COVID-19 pandemic when a Foxconn factory unexpectedly closed in China, following clashes between Chinese workers and security personnel over wages and Beijing’s strict COVID lockdowns, which impacted factory operations.

Foxconn’s Operations

Foxconn is Apple’s largest contractor and produces more than two-thirds of Apple’s iPhones. Foxconn is a Taiwanese company otherwise known as Hon Hai Precision Industry Co. Ltd that is one of the world’s biggest employers. It runs assembly plants for well-known brands such as Apple, Nokia, Playstation, and Nintendo. Most of these factories are in China.

Investments in India

In 2023, Foxconn made a $1.5 billion investment in the southern Indian state of Tamil Nadu, built a $600 million plant in Karnataka, and built a $500 million plant in Telangana. These investments were made in preparation for the assembly of the new iPhone 16 lineup.

Government Support

New Delhi has offered subsidies to companies in order to boost the manufacturing of IT hardware domestically under India’s PLI 2.0 Scheme for IT Hardware. Foxconn is one of the companies that received benefits from these subsidies, which include revenue-based annual payouts to manufacturers.

Opportunities and Challenges

Monish Tourangbam, director at the Kalinga Institute of Indo-Pacific Studies, said India possesses several key advantages as it seeks to expand its manufacturing sector. He said India has political predictability, an appetite for structural economic reforms, a competitive level of market forces and domestic consumption. However, Tourangbam said India lags behind China in terms of labor skills and maturity.

Conclusion

While India faces challenges in terms of labor skills and maturity, it has the potential to become a major player in the global electronics manufacturing landscape. With government support and investment from companies like Foxconn, India is poised to take advantage of its favorable business environment and tap into the growing demand for electronics.

Frequently Asked Questions

Q: What is driving the shift of cell phone manufacturing from China to India?
A: Geopolitical risks associated with commercial engagement with China are driving companies to seek alternative manufacturing locations.

Q: What are the benefits of manufacturing in India for companies like Apple?
A: India offers a competitive price environment, favorable business regulations, and a young workforce.

Q: Will the shift of manufacturing away from China impact the quality of electronics?
A: Not necessarily. While China has a long history of producing high-quality electronics, companies like Foxconn have established themselves as reliable contract manufacturers.

Q: How does India’s “China plus one” strategy benefit the country?
A: It allows India to develop its own electronics manufacturing ecosystem, create jobs, and reduce its dependence on Chinese manufacturing.