Apple's "Friend-Shoring" Strategy in India
Apple's Shift Away from Chinese Factories
Apple is gradually transitioning away from its dependence on Chinese factories over multiple decades, opting for a "friend-shoring" approach by shifting production capacity to Southeast Asian countries. This significant change is highlighted in a recent report by Bloomberg.
According to individuals familiar with the trade data, Apple exported iPhones worth $6 billion, made in India, in the six months leading up to September. This figure is projected to increase to $10 billion by the end of the year.
Apple's Suppliers and Indian Production
Three of Apple's suppliers, namely Taiwan's Foxconn Technology Group and Pegatron Corp., along with India's Tata Electronics, assemble iPhones in southern India. Foxconn's local unit, located on the outskirts of Chennai, is the top supplier in India, accounting for half of the country's iPhone exports.
The Indian government, led by Prime Minister Narendra Modi, has provided subsidies that have enabled Apple to assemble its high-end iPhone 16 Pro and Pro Max models, featuring improved cameras and titanium bodies, in India this year. Additionally, Apple is planning to open new retail stores, including in the southern tech hub of Bangalore and the western city of Pune.
The Trend of Friend-Shoring
Despite China still manufacturing the majority of iPhones, the friend-shoring trend has been in progress for several years. This trend is expected to become more pronounced towards the end of the decade as Apple's CEO, Tim Cook, seeks to diversify supply chains away from China.
Michael Every at Rabobank pointed out years ago that India was the largest beneficiary of friend-shoring. However, Cook cannot publicly announce the restructuring of supply chains out of China as it would anger Beijing. Hence, he recently praised Apple's 'symbiotic' relationship with China.
Re-Shoring Trend and Apple's Strategy
Last month, the re-shoring trend was highlighted when the Taiwan Semiconductor Manufacturing Company's plant in Arizona produced Apple's first batch of A16 chips. Earlier this year, Wedbush analyst Dan Ives informed Yahoo Finance that Cook has "hedged his bets" with China by friend-shoring iPhone production to Southeast Asian countries. This move is aimed at avoiding a repeat of the chaotic iPhone supply chains experienced in China during the Covid shutdowns.
Bottom Line
Apple's shift towards "friend-shoring" in India is a strategic move that reduces its reliance on China, diversifies its supply chain, and takes advantage of the benefits offered by the Indian government. This approach could potentially reshape global production networks and influence other companies' strategies. What are your thoughts on Apple's friend-shoring strategy? Do you think it will prove to be a successful move in the long run? Feel free to share this article with your friends and discuss it. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.
