Apple’s Contract Manufacturers and Component Suppliers in India

Technology giant Apple has been assembling smartphones, through its contract manufacturers, in India since 2017. However, until 2022, the Cupertino-based firm had used manufacturing facilities in India to assemble entry-level or legacy handsets. This changed last year when Apple started assembling the iPhone 14 models in India.

In the months from April to December, 2022, Apple’s contract manufacturers exported more than US$2.5 billion of iPhones from India – nearly twice the previous fiscal year’s total.
 

Sources told Bloomberg that Foxconn Technology Group and Wistron Corp each shipped more than US$1 billion of Apple’s iPhones abroad in the first nine months of the 2022-23 fiscal year. Meanwhile, Pegatron Corp., the third contract manufacturer for Apple present in India, was on track to export around US$500 million of gadgets, the sources said. 

On its part, India has been attempting to attract new investment through the production-linked incentives (PLI) scheme and other incentives targeting IT and electronics manufacturing. As per government records, since the PLI scheme went into effect August 2021, Apple contract makers and component suppliers have created a cumulative 50,000 direct jobs and maybe up to 100,000 indirect jobs. The data is extracted from the information requirements (submitted on a quarterly basis) from PLI scheme beneficiaries.

Apple’s manufacturing partners Foxconn, Pegatron, and Wistron have been enticed by PLI subsidies. These incentives, coupled with an abundance of low-cost labor, makes India an attractive electronics manufacturing location.

Tata’s entry into the Apple ecosystem in India

As of reporting on May 1, 2023 by BusinessLine – Wistron InfoComm Manufacturing (India) Private Limited registered in 2018 and Smartiply India Private Limited incorporated in India in 2020 – have applied to the National Company Law Tribunal and the Registrar of Companies to dissolve their India operations within the next year. These are under the Taiwanese electronics manufacturer Wistron.

The Wistron iPhone plant in Bengaluru has been taken over by Tata Electronics, with the deal completed end of April 2023. It is likely that Wistron will remain in the Indian market for its service business for the repair and maintenance of Apple products.

Tata is now reportedly seeking to acquire Pegatron’s iPhone manufacturing units. 

Currently, Tata make a semi-finished iPhone SE model but Economic Times are reporting that trial runs for parts assembly for the upcoming iPhone 15 have started at the Hosur plant. Tata seeks to achieve mass production of the iPhone 15 at 50,000 units/day. Its takeover of Wistron will provide the necessary knowhow and machine capability. 

Reducing production reliance on China

Apple, like many Western companies, has embarked on efforts to reduce its reliance on China as a center for production. This has been prompted by the ongoing trade war between the US and China, and the threat of further China-related trade restrictions elsewhere in the world.

At one point, 85 percent of the ‘Pro lineup’ of iPhones were made at the giant city-within-a-city of Zhengzhou, China. As many as 300,000 laborers work at the factory run by Foxconn to make iPhones and other Apple products.

New Delhi’s efforts to attract investment are also enhanced by the ‘China Plus One’ strategy. This is where companies avoid being solely reliant on production facilities in China and therefore divest and diversify their businesses by manufacturing in other countries. Apple had asked its contract manufacturers to move production out of China, in what was seen as an effort to minimize the impact of the ongoing trade tensions between the US and China.

China’s attractiveness as a manufacturing hub may also be fading due to other developments:

• China no longer offers an abundance of labor, and, as the nation has developed, labor costs have increased significantly. Demographic changes – China’s ageing population – have played a role here.
• Covid-19 restrictions, which caused supply chain bottlenecks and factory lockdowns, may have also exacerbated the shift away from China.
• It is also worth considering that Xi Jinping’s new, all loyalist, cabinet, is likely to be perceived as a further step towards authoritarianism, which may not mix well with business.

Who are Apple’s contract manufacturers in India?

Foxconn, Pegatron, and Wistron manufacture ‘end-to-end’ phones in India. Tata is a newcomer to the Apple assembly line and has taken control of Wistron’s operations.

14 Apple component suppliers seek to set up in India

As per reporting from Bloomberg on January 18, the Indian government has given its initial clearance to 14 of 17 Chinese suppliers submitted by Apple for operating in India. The companies will now need to find a joint venture (JV) partner in India and then seek full approval for setting up. Indian officials have reportedly said they will not allow the Chinese firms to set up a wholly owned entity in India.

The suppliers with initial clearance include Sunny Optical Technology, which already have an India presence as they do business with Xiaomi, Oppo, and Vivo; AirPods and iPhone assembler Luxshare Precision Industry Co.; Han’s Laser Technology Industry Group Co.; and Shenzhen YUTO Packaging Technology Co.

Sunny Opotech, a unit of Zhejiang-based Sunny Optical Technology has reportedly signed a deal with Apple to invest US$300 million to set up an India facility. The firm intends to roll out the project in phases till 2026 but is yet to finalize a location for the facility. Speaking with Businessline, Welly Liu, President of Sunny Opotech India, said the company aims for its new investment to “increase the revenues of the camera module business unit (BU) to $10 billion by 2026 from the present $3.5 billion.” Since the last three years, Sunny Opotech has been making camera modules for Android phones at a Tirupati facility (Andhra Pradesh state) in partnership with Celkon (Seven Hills).

Which Apple component suppliers are currently based in India?

Apple component suppliers in India [2020 Company Suppliers Catalog] include:

• Cheng Uei Precision Industry Company Limited (Foxlink) – Andhra Pradesh
• Flex Limited – Tamil Nadu
• Hon Hai Precision Industry Company Limited (Foxconn) – Tamil Nadu
• Jabil Incorporated – Maharashtra
• Lingyi iTech (Guangdong) Company – Tamil Nadu
• Shenzhen YUTO Packaging Technology Company Limited – Karnataka
• Sunwoda Electronic Company Limited – Uttar Pradesh
• Wistron Corporation – Karnataka [taken over by Tata Electronics]
• Zhen Ding Technology Holding Limited – Tamil Nadu

Jabil Inc. recently began making AirPod components – plastic bodies – for Apple in India. These are being shipped to Vietnam and China where the AirPod wireless earphones are assembled. Jabil has established a 858,000 square foot plant in Pune, and employees 2500 workers.

Where are Apple products manufactured in India?

Electronics manufacturing ecosystem in Tamil Nadu state

All three of Apple’s major contract manufacturers have operations located in Tamil Nadu. The state is a national powerhouse when it comes to electronics and hardware – accounting for 20 percent of the national production. The state is aiming to increase the share to 25 percent and enhance the industry’s output to US$100 billion by 2025 through the promotion of special economic zones (SEZs).

Tamil Nadu has two exclusive SEZs for electronics and hardware manufacturing – at Sriperumbudur and Oragadam in the Kancheepuram District. State and central government incentives, along with an abundance of skills in the region, have contributed to the Taiwanese firms setting up their operations in the state.

According to reports, the state of Tamil Nadu is home to 16 major electronics producers, including Nokia, Samsung, Flex, Dell, Salcomp, and HP.

Luxshare, a Chinese Apple contract manufacturer, is also looking to take over the now-defunct Motorola plant outside Chennai. The firm produces AirPods and entry-level iPhones in China.

Foxconn’s new investment plans 

The Karnataka state government greenlit a US$967.91 million Foxconn proposal in March 2023 to set up a facility under its Indian unit. It is expected to produce iPhones for Apple. 

On May 15, Foxconn held a ground-breaking ceremony of a new manufacturing facility to be set up in the southeastern state of Telangana, at Kongara Kalan at the outskirts of capital and IT hub Hyderabad. Foxconn is said to investment US$500 million in the state. Land parcel of 196 acres has been allotted by the state government and 25,000 direct jobs could be generated in the first phase of the plant’s operation. It is speculated that Foxconn could produce AirPods for Apple at the plant. Apple has requested Foxconn to expand its manufacturing capacity for the firm. Foxconn, per media reports, is moving forward despite the tighter margins as India works on bolstering its electronics production ecosystem. Apple is a longtime client and Foxconn is invested in the continued engagement.

Foxconn is the world’s largest technology contract manufacturer and its India facilities take orders for multiple electronics brands. Foxconn now has investments across South India – in Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu.

India wants to become an integral part of the Apple supply chain

Analysts have been making aggressive predictions about India’s iPhone production capacity in the next few years from 25 percent global production by 2025 (JPMorgan) to 50 percent (Taiwan’s DigiTimes) by 2027. The optimistic forecast may need to wait as more than 90 percent of iPhones are made in China where Apple has built its supply chain over almost two decades. According to a Bloomberg Intelligence estimate, it could take about eight years to shift just 10 percent of the company’s manufacturing capacity out of China. Currently, India accounts for seven percent of Apple’s iPhone production.

Meanwhile, global manufacturers experienced major disruptions to their China operations for the first time during the pandemic as Beijing established a strict zero-COVID policy. Most recently, Apple contract maker Foxconn’s Zhengzhou assembly plant had to stop operations last November over a COVID-19 breakout, leading the US tech company to warn of delayed shipments ahead of the holiday period.

Such factors will play into decision-making by CXOs to pursue a geographical de-risking strategy across their supply chains. India intends to take full advantage of this shift.

Koushan Das, Assistant Manager at the Business Intelligence division at Dezan Shira & Associates notes, “We have already seen an increase in the production volume for phones in the existing facilities. Going forward, contract manufacturers will continue to ramp up production in India, but it is also expected that several suppliers will join them as well, to ensure smoother operations. Already a few suppliers are in talks with the government – now picked up by international media – although these suppliers also provide components to other brands justifying their shift to India.”

Das predicts that Apple could move the production of additional products from its portfolio, such as tablets, earphones, or laptops, to India, though the decision will face stiff competition from Southeast Asian production hubs.

“For companies positively considering a move to India, the country offers various options with respect to location, as states continue to compete in areas such as incentives offered, skilled workforce, government support, and an easier land acquisition process”, he added.

Have manufacturers benefitted from the production linked incentives program?

Wistron has emerged as the single biggest investor under the government’s PLI scheme for large-scale electronics manufacturing, bringing in US$153 million, according to reports. Foxconn is the third largest, at around US$79 million.

The government launched the PLI scheme in March 2020 to encourage manufacturing and create jobs. As of November 2022, the scheme has helped the development of 29,000 jobs, according to data from the Ministry of Electronics and IT.

It is understood that Pegatron is also benefitting from the scheme. Pegatron has to invest US$31 million, with production worth around US$970 million, in order to be eligible for the PLI incentives for the second year.

China plus one: India faces competition from Southeast Asia

India is an attractive destination for investment in manufacturing primarily due to the wealth of lost-cost labor and government incentives through the Make in India’ initiative. However, the nation has several challenges, which may thwart further investments.
 

These issues include a lack of formal training – only around three percent of the workforce have formal training of any kind and widespread female unemployment due to social factors, mobility issues, and health challenges.

Other nations, particularly in the ASEAN region, offer attractive alternative bases for the production of electronics and hardware. For example, it has been reported that Foxconn is relocating some assembly of Apple MacBooks at its plant in Vietnam’s northeastern Bac Giang province. MacBooks had been the only Apple product to be solely manufactured in China.

Vietnam offers many of the same benefits that manufacturing in India does. With a population of nearly 100 million people, Vietnam has an abundant and cheap labor force. The minimum wage in Vietnam varies from US$140 to US$202 depending on the living expenses in a particular region. By comparison, the minimum wage in India is approximately US$65 per month.