Apple may shift 30-35% of global iPhone production to India in next 5 years | Company News

Seven years later during his second official trip to India in April 2023, Cook, who honed his skills in sales, specialised  in global supply chain management and industrial operations, was busy opening the first fully-opened Apple stores in Mumbai and Delhi. Three years on as John Ternus enters the corner office at the Cupertino headquarters, India is  already producing one out of four iPhones for the world and is also emerging amongst  the fastest growing markets for  iPhones. 

The last decade that saw Cook make two trips to India, as against several more to China, tells a story of what this country means to the American tech company and vice versa. His visits also offer a prism on how to assess the Apple-India relationship through the years, with China as a reference point. With India now being seen as much more than a hedge against Apple’s reliance on China in assembling iPhones, the question is: What could change once Ternus, a hardware engineer, takes charge? 

While the roadmap is being drawn, the government has already stepped in with a ₹62,500-crore bonanza incentive package for the next five years for mobile phones (after the production-linked incentive or PLI scheme in mobiles ended in FY26). Apple Inc vendors are expected to be the biggest beneficiaries, analysts said. Besides notifying the new incentive scheme recently, the government extended tax exemptions for contract manufacturing till March 31, 2041. Apple products are manufactured through a global network of outsourced suppliers and assembly partners.         

“In the next five years, we expect Apple to shift about 30-35 per cent of its global iPhone production to India from 25 per cent currently,’’ an official of the Ministry of Electronics and Information Technology (MeitY) said. The overall annual production value could rise from $25 billion in FY26 to around $40-45 billion by FY31, he pointed out. 

However, the initial iPhone assembly journey in India, which took off about a decade ago, was tough, with issues around refurbished phones and duty rates coming up frequently as obstacles. It was only in the last five years that India got a firm footing in relation to Apple, sources pointed out. Ternus is expected to take it to the next level, with India getting integrated into Apple’s product development and not just the production pipeline.    

Dipanjan Chatterjee, principal analyst of Forrester, said: “Ternus understands the product and engineering side of the supply chain in a way that could help Apple move beyond simply assembling iPhones to building a deeper manufacturing ecosystem and making India a significant part of its global supply chain.’’ 

That’s an initiative that Cook has been keen on. It’s about Apple building a supply chain in India with 40-odd companies, including a large number of home-grown players including the Tatas and the Aditya Birla Group. “This electronics ecosystem, which is being built in precision engineering, will also supply to other deep tech which we are encouraging from aerospace to robotics to defence,” said the Meity official.       

Chatterjee, who tracks Apple closely, explained that Ternus’ hardware orientation could help secure Apple a better position in India through improved product localisation. The new CEO is also likely to focus on “accessible premiumisation’’ — required for a price-sensitive market like India.   

Even so, China story rings loud. Around 80 per cent of Apple’s global suppliers (over 200) are based in China, it is its second largest revenue earner after the US, and it accounts for every three out of the four iPhones assembled globally. 

To make it work in India, Apple reworked its strategy almost at the same time when the government was looking at a scheme to incentivise manufacturing to usher in “Atmanirbhar Bharat” with mobile phones as a key area. It clicked. Apple Inc became the biggest beneficiary of the ₹30,000-crore five-year PLI scheme for mobile phones launched in April 2020. For India, Apple turned out to be the poster boy for global manufacturing. Describing the working relations with Apple, the Meity official cited above said: “We are always a phone call away to discuss and resolve any issue they face, and that is how it should be.” 

An Apple Inc vendor called it a “whole of government approach to business’’. He said that right from the Prime Minister’s Office to various other ministries such as Meity, commerce, finance and external affairs, there’s coordination to get the job done. “That is the comfort we have,” the executive said. 

A source recalled an incident during the pandemic when both India and China were in a lockdown. Apple vendors, Foxconn and Wistron, which were building their factories in India to make iPhones, needed technical experts to come from China. The government organised special Air India flights between China and India for that. Freight carriers were also organised to bring second-hand machines from China to these facilities. MeitY and the ministry of external affairs coordinated for visas. 

Behind the Apple-India success story are many tales of lobbying and flexibility in policy-making. “Apple lobbied with the government successfully to get a clause dropped that imported second-hand machinery from China will be evaluated at a discounted value — which would be the basis of its vendors’ incremental investment under the PLI scheme,’’ a source said. The government also tweaked its rules on single brand retail to relax the 30 per cent local sourcing norm. 

Apple had to respond, when required. For instance, in 2022, Apple was trying to get Chinese manufacturing giant BYD to set up an iPad factory. India declined amid the Galwan border clashes in 2020 and Apple shifted the project to Vietnam. Apple also had to drop its proposal for about a dozen Chinese joint venture projects in India. 

Cook also played a crucial role in insulating India from Donald Trump’s changing stance on tariffs. He committed a $600-billion investment in the US on servers and semiconductors and ensured mobiles were exported from India at zero duty.   

Against this backdrop, Tarun Pathak, research director at Counterpoint, summed up the challenges for Ternus:  “Balancing China’s depth, India’s growth and US commitment would be a continuous negotiation for Ternus.”