Why is Apple betting big on India as a manufacturing hub?

I SEE IT as an incredibly exciting market and it’s a major focus for us. In terms of the operational side or supply chain side, we are producing there. From a pragmatic point of view, you need to produce there to be competitive.” That’s how Apple CEO Tim Cook responded to a question on the Indian market during the company’s second-quarter earnings call in May 2024.

Cook has mentioned India repeatedly in his opening statements during every analyst call over the past few quarters. And that’s not surprising. Over the last 4-5 years, Apple’s turnover in India has risen nearly 5x — from $1.8 billion in FY20 to $8 billion in FY24, making it one of the Top 10 MNCs operating in the country during the last fiscal.

Yet, India accounts for just a speck — about 2% — of Apple’s global turnover of $391 billion. But all that is changing.

Apple’s operation in India is quite different from that of other multinationals. Its mainstay is not for access to India’s huge domestic market alone, but also about manufacturing in India for the world. It’s unique since no other multinational or domestic company uses India as a key source for global manufacturing — that too, for a leading branded product.

The company is building a strong local ecosystem, which includes Indian companies such as the Tata Group and Motherson Group, and global suppliers such as Sunwoda, Salcomp, ATL, Avary, Flex and Jabil, in addition to Foxconn and Pegatron.

Unlike others, Apple does its manufacturing in 2-3 countries. The iPhone is made only in China and India. There are some operations in Vietnam relating to iMac and iPad, but the scale and growth opportunities of manufacturing in India is second only to China.

The tech giant has exported iPhones worth $10 billion in addition to the domestic turnover of $8 billion, totalling $18 billion (₹1,52,000 crore). Apple’s India operations — both domestic sales and exports — are expected to touch $23.68 billion (₹2 lakh crore) in FY25.

To cater to the rising demand for iPhones in India, Apple opened two mega stores — in Mumbai’s Bandra Kurla Complex (BKC) and Delhi’s Saket area — in April 2023. Cook has since announced opening of four more Apple Stores in India — one each in Pune, Bengaluru, Delhi-NCR and Mumbai. During September-December 2024, the company achieved over 9% market share in India, and is now the fifth-largest smartphone seller in the country by volume. The rise in disposable income of the middle class has led to a significant increase in demand for premium smartphones.

The success story in India is mainly driven by local manufacturing, enabled by the Production-linked Incentive (PLI) scheme announced by the government in 2020. Three of Apple’s vendors, Foxconn, Wistron and Pegatron, have been part of the scheme. Wistron was bought out by Tata Electronics in FY24.

The Apple ecosystem includes several local companies among its suppliers. In fact, the iPhone factories are emerging as India’s largest employers, across sectors. Foxconn in Tamil Nadu and Tata Electronics in Karnataka have, within the last three years, hired 42,000 and 31,000 direct employees, respectively, nearly 70% of which are women.

To cater to the large base of women employees, Apple is building India’s largest women hostels. By 2026, it will provide over 1 lakh residential units to women working in iPhone factories. In contrast, the country’s largest working women hostel currently houses only 500-600 female workers at best. Also, with nearly 2 lakh direct employees expected by mid-2025, the Apple ecosystem has emerged as the largest and fastest growing blue-collared job creator in just four years.

Domestic manufacturing has also helped Apple reduce costs. The main challenge to its sales in India relates to customs duties on inputs (among the highest compared to other manufacturing destinations) and GST, currently at 18% on most Apple products. Over time, as taxes and duties get rationalised, the tech giant should be in a position to increase its sales further.

As the Indian consumer adopts premium products across sectors, Apple, too, should see a further rise in demand. It just remains to be seen how quickly the Nasdaq-listed company rises to be among the Top 5 multinational brands in India.