Last week, Apple announced plans to make its latest phone model – iPhone 14 – in India, a significant milestone in the company’s strategy to diversify manufacturing outside of China.
5% of iPhone 14 production is expected to shift to the country this year, much sooner than analysts had anticipated.
By 2025, a quarter of all iPhones the company makes could be produced in India, say analysts at investment bank JP Morgan.
Apple has been manufacturing iPhones in the southern Indian state of Tamil Nadu since 2017.
But the decision to make their flagship model in India is a noteworthy step as trade tensions between Beijing and Washington show no signs of letting up.
The move also assumes significance in the backdrop of the global supply chain “de-risking” which is underway because of China’s “zero-Covid” policy.
Apple has been manufacturing iPhones in the southern Indian state of Tamil Nadu since 2017
‘China plus one’
Beijing’s hard-line approach to eradicating the pandemic has led to industrial lockouts and large-scale supply chain disruptions. As a result, global firms are increasingly adopting a “plus one” strategy – or avoiding investing in China alone – to re-orient their supply chains.
“Companies are no longer willing to sit and wait for a policy change in China, or put their eggs in one basket for their sourcing needs,” CEO of logistics company DHL’s supply chain business, Oscar De Bok, told the BBC.
“They want to make sure they have two or three alternatives,” said Mr De Bok, adding that this trend towards “omni-sourcing” had clear beneficiaries in countries like India, Vietnam and Mexico.
Mr De Bok was in India’s financial capital Mumbai to announce a €500mn ($49mn; £43mn) investment to double DHL’s warehousing capacity and headcount in the next five years.
He said this commitment was driven, in part, by the growth of foreign investment in sectors such as manufacturing and electronics where Prime Minister Narendra Modi’s government has been offering financial incentives to companies that are keen on making India their production hub.
As part of this production-linked incentives (PLI) scheme, mining conglomerate Vedanta Resources has also earmarked investments of close to $20bn (£17bn) to set up a semiconductor plant in India in collaboration with the Taiwanese electronics manufacturing giant Foxconn.
Chairman of Vedanta Resources, Anil Agarwal, said last month that the world was looking to adopt a “China plus one” strategy and that “India is clearly in a sweet spot”.
India, which is Asia’s third largest economy, has been working hard to position itself as an attractive manufacturing and exports hub for multinationals.
It has a large domestic market and plentiful low-cost talent.
With GDP growth in the range of 6-7%, and headline inflation that’s more modest than in many other parts of the world, India has been one of the better-performing major economies this year.
Its merchandise exports crossed the $400bn mark after stagnating at the $300bn ballpark for nearly a decade.
Besides fiscal sops, Mr. Modi’s administration has also been giving a major push to bilateral trade pacts in a bid to integrate India more deeply into global supply chains and rejig its image as a notoriously slow negotiating partner.
Businesses have welcomed these initiatives.