Other BriefingsApple’s Manufacturing Shift: Emerging Investment Opportunities in India’s Electronics and Supply Chain
Apple and its suppliers aim to reach 32 percent of global iPhone manufacturing and 26 percent of their production value in India by 2026-27. We examine the implications for future foreign investment opportunities as India advances its electronics supply chain and aims for greater integration into global value chains.
Apple and its suppliers are aiming for a significant shift in global iPhone production, with plans to assemble 32 percent of global output and 26 percent of its value in India by 2026-27. This comes in the wake of the completion of the five-year Production Linked Incentive (PLI) scheme for mobile devices. The ambitious target could see India’s iPhone production value soar beyond US$34 billion, assuming global iPhone sales remain steady at FY24 levels.
The move marks a significant step in Apple’s ongoing efforts to diversify its manufacturing base away from China, a trend that has accelerated in recent years amid geopolitical tensions and rising labor costs. Sources close to Apple, its suppliers, and government officials have confirmed these projections.
Also read: Apple’s Contract Manufacturers and Component Suppliers in India
Projected growth in India’s iPhone production
For the first half of fiscal year 2024-25 (FY25), Apple’s vendors are forecasting a freight-on-board (FOB) production value of US$9 billion. By the end of FY25, India is expected to contribute 17-18 percent of global iPhone production volume and 14 percent of its value, up from only 12-14 percent in FY24. The country’s production value of iPhones in FY24 stood at US$14 billion, marking a steady rise in Apple’s manufacturing footprint within India.
India’s iPhone manufacturing ramp-up is set to continue, with vendor projections suggesting a final FY25 production value of US$18 billion, translating to a market value of approximately US$27 billion. This includes the market price, distribution, and dealer margins, while FOB reflects the value at the point of shipping. The shift in production is part of Apple’s strategy to reduce its dependency on China, which has long been a key manufacturing hub for the tech giant.
Economic impact and strategic shifts
This production shift holds significant economic implications for India. iPhones make up over 51 percent of Apple’s global revenue, and with an expected total of US$391 billion for the company’s financial year ending September 30, 2024, iPhone sales will contribute over US$201 billion of this total. This makes iPhone revenues larger than the entire annual revenues of major corporations like Tata Group (US$165 billion), Reliance Industries (US$119 billion), Microsoft (US$211 billion), and Nestlé (US$103 billion) per a Business Standard report. As such, any increase in iPhone production in India could provide a major boost to the country’s economy, particularly in terms of job creation, supply chain development, and foreign investment.
The shift also comes in the context of heightened U.S.-China trade tensions. Although Apple had initially committed to moving just 10 percent of iPhone production to India by the end of the PLI scheme’s fifth year, it has already exceeded this target. JP Morgan’s previous estimates suggested that 25-30 percent of iPhone production could move to India by 2026-27, and this forecast may now be on track for earlier realization.
Challenges and future considerations
However, the path forward is not without its challenges. Apple’s ambitious production goals hinge on India’s ability to address key cost disparities with China and other Southeast Asian manufacturing hubs like Vietnam. Key hurdles include reducing component tariffs, improving labor laws, and streamlining logistics to make India a more attractive manufacturing destination.
Moreover, meeting the value-addition targets of 35-40 percent by the end of the PLI scheme may require further incentives and reforms. If the Indian government can successfully overcome these obstacles, India could become an even more integral part of Apple’s supply chain, further bolstering the country’s position in global tech manufacturing.
This evolving dynamic is also influenced by potential changes in U.S. trade policy. Should President-elect Donald Trump impose punitive tariffs on Chinese-produced mobile devices, which he has proposed could rise to as high as 60 percent, Apple’s shift in production to India could gain momentum. This would give India and other countries like Vietnam a competitive advantage in the global tech supply chain.
In conclusion, Apple’s increased reliance on India for iPhone production is set to continue, with significant economic ramifications. While the journey to 2026-27 will be shaped by both domestic and international factors, India’s growing role in Apple’s manufacturing strategy is undeniable and could see the country emerge as a key player in the global smartphone market.
Scope for foreign investment in India’s electronics manufacturing
Several key investment opportunities are emerging for foreign firms in the Indian electronics manufacturing sector. These opportunities span across various areas, including production, supply chain support, and infrastructure development.
Mobile and electronics assembly facilities
With Apple and its suppliers increasing production in India, there is a growing demand for assembly facilities and production plants. Foreign firms can invest in setting up or partnering with local companies to establish assembly units for smartphones, tablets, and other consumer electronics. These plants could be beneficiaries of the PLI scheme, which offers financial incentives to boost local manufacturing and exports.
Investment opportunities:
- Establishing joint ventures with Indian manufacturers for mobile assembly.
- Setting up new factories focused on assembling other electronic products, such as wearables, tablets, and home appliances.
Component manufacturing and supply chain
India’s electronics manufacturing growth hinges on the availability of quality components, such as semiconductors, displays, batteries, and camera modules. As iPhone production expands, foreign firms can invest in localizing the production of these components within India to reduce dependence on imports.
Investment opportunities:
- Building manufacturing units for key smartphone components (displays, semiconductors, batteries, etc.).
- Developing a network of suppliers for electronic components to support Apple and other global OEMs.
- Investing in research and development (R&D) for next-generation components, including 5G components and AI chips.
Tech-enabled infrastructure and logistics
As the production of iPhones and other electronics products increases in India, so will the need for efficient logistics and supply chain management solutions. Foreign firms with expertise in logistics, warehousing, and supply chain technologies can tap into this opportunity by investing in India’s infrastructure.
Investment opportunities:
- Investing in logistics companies that specialize in the transportation of electronic goods, including raw materials and finished products.
- Developing smart warehousing and inventory management solutions for the electronics industry.
- Setting up facilities for quality control and testing of electronic products to ensure international standards.
R&D and design centers
As India becomes a larger player in electronics manufacturing, foreign companies can set up R&D and design centers to drive innovation in product development and customization for the local market. These centers can also contribute to global product lines for firms like Apple, Samsung, and others.
Investment opportunities:
- Establishing R&D hubs to focus on product development for the Indian and other emerging markets.
- Setting up design centers to customize electronics for Indian consumer preferences, especially in mobile phones, wearables, and home appliances.
- Collaborating with Indian universities and tech institutes for talent acquisition and joint innovation projects.
Skilled workforce training and education
With the increasing demand for skilled labor in electronics manufacturing, there is a significant opportunity for foreign firms to invest in skill development and training programs. These initiatives can help bridge the gap between the availability of talent and the growing needs of the electronics industry.
Investment opportunities:
- Partnering with Indian educational institutions to offer specialized programs in electronics engineering, manufacturing technologies, and industrial design.
- Establishing private training centers or skill development programs in collaboration with government initiatives to create a pipeline of skilled workers for the electronics sector.
Renewable energy and sustainability solutions
With the rapid growth of manufacturing, foreign firms can also invest in sustainable energy solutions to power electronics manufacturing facilities. India is focusing on expanding its renewable energy capacity, and electronics manufacturing plants could benefit from integrating solar, wind, and energy-efficient technologies.
Investment opportunities:
- Investing in clean energy solutions, such as solar power installations, to meet the energy needs of electronics manufacturing plants.
- Developing energy-efficient technologies and solutions that can be implemented in electronics production processes.
- Providing waste management, recycling, and circular economy solutions for the electronics industry.
Foreign direct investment (FDI) in electronics-related startups
The rapid expansion of India’s electronics manufacturing industry has given rise to numerous startups focusing on electronics design, smart technology solutions, and sustainability. Foreign firms can explore opportunities to invest in these startups, which offer high growth potential and align with global trends in smart electronics and sustainability.
Investment opportunities:
- Partnering with or acquiring Indian startups that specialize in smart electronics, IoT, and AI-driven products.
- Investing in startups focused on green electronics and sustainable production methods.
- Fostering innovation through venture capital and private equity investments in emerging tech companies within India’s electronics sector.
Electronics export and trade services
As Apple and other companies expand production in India, the country’s export of electronic goods is poised to increase. Foreign firms involved in global trade and export services can capitalize on the growing demand for Indian-made electronics.
Investment opportunities:
- Developing trade facilitation services that assist in the export of electronics from India to international markets.
- Investing in export-oriented businesses, including contract manufacturing and product assembly services for global brands.
- Building export infrastructure, such as specialized ports or shipping services for electronics products.
Conclusion
The growing shift of iPhone production and other electronics manufacturing to India presents several attractive investment opportunities for foreign firms. With Apple and its suppliers aiming to increase local production, there is significant potential in setting up mobile assembly facilities, component manufacturing units, and tech-enabled infrastructure such as logistics and smart warehousing solutions.
Foreign firms can also invest in R&D and design centers to develop products tailored to the Indian market and support global product lines. Additionally, there is a need for skilled labor, opening doors for partnerships with educational institutions or training centers to cultivate a workforce equipped for electronics manufacturing. Sustainability solutions, including renewable energy installations and energy-efficient technologies, also offer investment potential as India’s manufacturing sector grows.
Moreover, the rise in electronics exports creates opportunities in trade facilitation services and export infrastructure. With the support of India’s government incentives like the PLI scheme, a focus on self-reliance in manufacturing, and emerging pivot to green industry, these areas represent promising avenues for foreign investment in India’s rapidly growing economy.
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India Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Delhi, Mumbai, and Bengaluru in India. Readers may write to india@dezshira.com for support on doing business in India. For a complimentary subscription to India Briefing’s content products, please click here.
Dezan Shira & Associates also maintains offices or has alliance partners assisting foreign investors in China, Hong Kong SAR, Dubai (UAE), Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Bangladesh, Italy, Germany, the United States, and Australia.
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