Who Are Apple’s Contract Manufacturers in India?

Posted by Written by James Fox Reading Time: 7 minutes

There are three major companies contract manufacturing Apple products in India. We discuss their investment scope and new suppliers joining the ecosystem. The US technology giant has been increasingly adopting a ‘China plus one’ strategy to reduce its overreliance on the manufacturing behemoth. Meanwhile, India is working to advance the capabilities of its electronics manufacturing ecosystem. Consequently, and despite the strict screening of FDI from neighboring countries, 14 Apple suppliers from China have reportedly received the initial clearance by the Indian government for investment. These suppliers will not be allowed to set up a wholly owned entity, but can establish a joint venture with local companies.


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 have each shipped more than US$1 billion of Apple’s iPhones abroad in the first nine months of the fiscal year. Meanwhile, Pegatron Corp., the third contract manufacturer for Apple present in India, is 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.

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.

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?

Contract Manufacturer

Origin

Additional information

Foxconn

Taiwanese

Hon Hai Precision Industry Co., Ltd., trading as Hon Hai Technology Group in China and Taiwan and Foxconn internationally, is a multinational electronics contract manufacturer

Pegatron Corp

Taiwanese

Electronics manufacturing company that mainly develops computing, communications and consumer electronics for branded vendors

Wistron

Taiwanese

An electronics manufacturer. It was the manufacturing arm of Acer Inc. before being spun off in 2000.

Tata Group

India

Established in 1868, it is India’s largest conglomerate with holdings in sectors from aviation to tea.

14 Apple component suppliers 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).

Where are Apple products manufactured in India?

Contract manufacturer

Locations

Output

Additional information

Foxconn

Sriperumbudur, Tamil Nadu

It began producing iPhone 14 in 2022.

More than 40 percent of the employment created by the three Apple contract manufacturers can be attributed to Foxconn.

Pegatron Corp

 

Singaperumalkovil, Tamil Nadu

Started manufacturing iPhone 12 handsets earlier this year.

It is generally responsible for assembling Apple’s entry-level models.

Wistron

Hosur, Tamil Nadu

Produces eight iPhone lines

Tata is in talks to take a majority state in a joint venture, essentially taking control of Wistron’s operations in India.

 

The facility employs roughly 10,000 people at its 500-acre plant.

Staff size expected to grow at least fivefold under Tata’s plans. The group is looking to build an electronics ecosystem in Hosur.

Tata Group (subject to deal with Wistron)

 

 

 

 

All three of Apple’s major contract manufacturers are 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.

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 roughly 98 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.

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.

(With inputs from Melissa Cyrill.)

This article was originally published January 17, 2023. It was last updated January 18, 2023.


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