Apple Suppliers Accelerate Expansion Outside China, Analysts Report

India and Vietnam are becoming key manufacturing hubs for Apple Inc. as the company seeks to strengthen its supply chain, which has been heavily reliant on China and has faced recent geopolitical and health-related disruptions.

Major electronics manufacturers are hastening their efforts to diversify production globally, leveraging local incentive programs, according to analysts from Counterpoint Research, Ivan Lam and Shenghao Bai. This multi-year initiative, which began before the COVID-19 pandemic and the resulting economic challenges in China, may see leading partner Hon Hai Precision Industry Co., commonly known as Foxconn, shift as much as 30% of its production capacity to India, Vietnam, and Brazil.

However, analysts caution that an immediate replacement for China’s extensive manufacturing capabilities is unlikely. Companies like Foxconn and its Taiwanese counterpart Pegatron Corp. are laying the groundwork to increase final assembly and packaging operations outside of China.

Foxconn and Pegatron have already invested in factories, production lines, and workforce training in India. The country’s large population and high birth rate present opportunities for both direct product sales and manufacturing, while Vietnam offers a workforce with lower labor costs than China. Although 21 Apple suppliers have established operations in Vietnam, the country currently lacks the capacity to produce the crucial iPhone.

Counterpoint’s research indicates that smartphone production in India surged by 16% in the second quarter of this year, reaching over 44 million units.

On the other hand, data from the World Bank reveals that China’s workforce has been declining since 2020. A well-trained and skilled labor force has been essential to China’s status as a global manufacturing powerhouse.

Apple has been working to minimize reliance on specific factories by making its iPhone design more modular and easily transferable between production sites. The company has emphasized maintenance simplicity and the swift deployment of new assembly lines.

According to the analysts, the manufacturing challenges encountered with the iPhone 14 and iPhone 14 Plus models were significantly reduced. It is now feasible for manufacturing plants in India to produce the iPhone 14 almost concurrently with those in China. Apple has also accelerated the start of iPhone production in India compared to earlier generations.

Overall, the strategic shifts in manufacturing are positioning both India and Vietnam as vital players in Apple’s production landscape.