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A sign of India’s rise up the industrial value chain was powerful: Apple recently announced that it has begun assembling the iPhone 14 in India, just weeks after launching the new model.
Three Taiwanese companies that work for Apple in India – Foxconn, Pegatron and Wistron – will bring the 14 together at their sites in the south of the country, said two people familiar with the US company’s secret operations.
Apple has not released any details about its India operations, except to say that it was “excited” to make the new phone in India. However, in a recent research note by JPMorgan, Apple Apple could make one in four iPhones and other devices in India by 2025 as Covid-19 lockdowns and geopolitical tensions push it away from China.
Indian Railways and IT Minister Ashwini Vaishnau told FTF a few days later that the country’s government is actively encouraging and supporting Apple’s investments and efforts to build its supply chain in India. It also confirmed that, at least to begin with, iPhone operations in India will be mostly assembled – perhaps largely dependent on imported components.
“All industries start with product collection,” Vaishnau said. “In the next phase – two to four years – this will go deeper, when parts and modules will start to be produced and a complete local ecosystem will be created.”
If indeed this happens, it will fulfill a long-term policy ambition of the Narendra Modi government, which wants to promote Indian manufacturing to 25% of GDP by 2025.
Backed by incentives for investors in sectors such as electronics and pharmaceuticals, the government aims to create new jobs, boost India’s exports and import technology products, particularly from China, which will help widen its current account deficit.
Vaishnaw and other officials are convinced that India has reached a golden age when many global manufacturers have cut their dependence on China. In the year Since his first term in office in 2014, Modi has been “exercising India’s lack of success in manufacturing,” said a person familiar with the prime minister’s thinking.
India is not alone in grabbing some Chinese business: Vietnam is already taking investments from Apple and other policymakers and consultants are expanding their supply base in what policymakers and consultants call a “China Plus One” push. India’s unique selling point is its large domestic market – although most of its customers are buying cheap Chinese-made Androids rather than Apple’s iPhones.
But getting component suppliers to put down roots, Vaishnaw said, will be critical to achieving India’s goals — keeping investors like Foxconn going even after government incentives end.
Some are already warning that India’s ambitions may be limited by the protectionism of policymakers.
“The approach to supply chains in India is that the entire supply chain should be located in India and managed by Indians,” said Mihir Sharma, director of the Observer Research Foundation. But other China Plus One countries like Vietnam say, ‘Let’s identify the parts of the supply chain that we have an advantage in and then focus on those.’
India’s push to develop a viable supply chain for iPhones could also be weakened, Sharma said, as the government manufactures more components for them because of tensions with China. Indian authorities have banned Chinese apps and taken regulatory action against Chinese mobile phone manufacturers following a heated border dispute in New Delhi and deep mistrust in Beijing.
“If the goal is to reduce the dependence on China, it will not be good to create a manufacturing sector here,” said Sharma. “They are entering a supply chain that is controlled by China.”
Indians ask if their suppliers can increase. Ashish Dhawan, CEO of the Convergence Foundation, which focuses on economic development issues, pointed out that India has a good precedent in the automotive industry. Early manufacturers like Maruti Suzuki painstakingly built deep supply chains and a large, viable industry with deep roots, assembling cars from imported parts.
“The whole value chain came to India and then it became competitive,” he says. “But it takes time.”
john.reed@ft.com
Twitter: @JohnReedwrites
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