Foxconn, Taiwan’s contract manufacturing behemoth and the biggest production partner for Apple globally, will be the investment partner for the iPhone maker’s latest push. The Taiwanese assembler’s factory in Chennai will be used to shift production for Apple’s global markets, with as much as 70-80% of the output of those devices predicted to be exported elsewhere.
The strategic move by the world’s most valuable brand comes at a time when the US and China are engaged in a trade war, prompting companies that are heavily dependent on manufacturing in China to look elsewhere for making their products. In 2018, Apple detailed a new strategy to target the Indian market, with official retail stores, more frequent sales, overhauled relationships with independent retailers and improves services and apps.
“Apple has started manufacturing iPhones in India, making components and exporting as well,” added Ravi Shankar Prasad, the information technology and electronics minister in India. India has set its sights on creating a $400 billion electronics manufacturing ecosystem by 2025 and has already notified a new electronics policy to boost manufacturing activities.
Largely due to the lack of demand for premium phones in India, Apple’s market there is currently limited to 1% by volume and 3% by value. This is despite India becoming the fastest-growing smartphone market with shipments worth 36.9 million in the second quarter of 2019, according to the International Data Corporation’s (IDC) Asia/Pacific Quarterly Mobile Phone Tracker. The American electronics giant has also been losing to other Asian brands like Xiaomi, Vivo, and Samsung.
Nonetheless, the Cupertino-based corporation finalized a list of locations for its first retail store in India in May, with the first of three brick-and-mortar outlets expected to be launched in Mumbai in the next year, followed by the capital New Delhi and Bengaluru over the next two to three years.
As Apple used to build some of its iPhone SE and iPhone 6s models in India with more manufacturing now planned, it is making headway to satisfy the long-time export hurdle set by the Indian government. The Union Cabinet last month approved relaxation in FDI norms for single-brand retail, allowing them to limit their sourcing in India to just 10% from 30% earlier - provided they export 20% of their products to other countries.