Apple Could Move 18% of iPhone Production to India

Apple is reportedly planning to shift approximately 18% of its global iPhone production to India by the fiscal year 2025. This significant move is a response to the government’s production-linked incentive (PLI) scheme for mobile phones. The tech giant may consider further expansion if the initiative encourages its suppliers to also grow their presence in the country, according to a recent report from Bank of America.

The Bank of America analysis further highlighted that the Indian government’s PLI scheme could aid India in achieving its bold objective of tripling its domestic production to $126 billion. It also anticipates that the policy would spur a five-fold increase in exports to $55 billion by 2026.

Mobile phones currently account for 21.5% of India’s domestic electronics demand, with a reported 15% annual compounded growth. The PLI scheme for mobile phones has already shown positive results, with a 3.9-fold increase in mobile phone production and a staggering 65-fold rise in exports since 2017, while imports have been reduced to a third.

However, the scheme has faced criticism due to its low production value add of 18%, compared to 38% and 24% in China and Vietnam respectively. The report also pointed out that 70% of a mobile phone’s cost — which includes display, memory, and other semiconductors — is challenging to localize in the short term due to high capital expenditure and the need for advanced technology.

In 2023, India consumed electronic goods worth $158 billion, with an annual compounded growth of 11% from 2017-23. However, most of these supplies were primarily met by imports. Electronics imports in 2023 stood at $77 billion, becoming the second-largest import bill that contributes to a fifth of the country’s trade deficit.

The report concluded that the PLI scheme would play a crucial role in India’s efforts to reduce imports and boost exports. This shift would potentially improve the country’s macroeconomic outlook, decrease the current account deficit by $112 billion over five years, stabilize foreign exchange, and stimulate growth in the capital expenditure, credit, and logistics sector.

What Display Daily Thinks

India has been a significant part of the outsourcing of technology jobs and has the human capital to throw behind the needs of any company wanting a lower cost base. Now, with PLI, the India government is sweetening the pie even further, and there is no reason to assume that barring any shifts in political or political stability, the country can’t be doing for consumer electronics manufacturing what it did for enterprise and Silicon Valley software companies.

Vietnam, for example, has tried for a number of years to get its share of outsources software development, and the country has talented software developers and better pricing for labor than India where competition for talent has driven prices up over the last decade. But, that hasn’t shifted the focus of outsourcers or hurt India’s market. So, it’s not just the costs, but the familiarity of companies with having technology teams in India.