Supply Chain Matters provides our readers added perspectives on this week’s reports indicating that Apple has initiated plans for production of the upcoming new model iPhone14 to be sourced from both China and India.

This development, initially reported by Bloomberg Technology (Paid subscription or metered view), indicates that plans call for the upcoming new Apple iPhone14 model to be produced in India, likely two months after high volume production begins in China.

As our readers are aware, decisions such as this do not occur without a lot of pre-planning and collaboration. In a Supply Chain Matters posting published a little over three years ago, we highlighted a published report from Nikkei Asian Review that had indicated Apple’s request to major suppliers and contract manufacturers to evaluate the cost implications for shifting fifteen, to as much as thirty percent of production capacity from China to other Southeast Asia regions. The report specifically cited iPhone contract manufacturing assemblers Foxconn, Pegatron, Wistron, MacBook producer Quantra Computer, AirPods producer Inventec, each being asked to evaluate alternative sourcing cost and other factors.

Since 2017, Apple’s product management teams and contract manufacturer’s Foxconn Technology and Wistron have been sourcing production of the company’s older and lower cost iPhone models to production facilities within India to support domestic and regional smartphone product demand needs. There have been some developments related to a significant labor disturbance at one facility over workers protests for not being paid, as well as a food poisoning incident involving a factory run cafeteria. It appears that a much learning has occurred during this time, and that India based production teams may be ready to now take on the challenge of participating in a new iPhone production ramp-up. In April of this year, a facility in India began producing the iPhone13.

The Bloomberg report indicates that after evaluating processes related to shipping various smartphone components from China, as well as adhering to Apple’s standards for total confidentiality in supply network component and final assembly processes, Apple and Foxconn concluded that a concurrent simultaneous ramp-up of volume production in both China and India would reportedly not be realistic. Instead, the plan is that Foxconn’s China based facilities will initiate ramp-up production at time of scheduled product release next month, and that India will follow either in late October or November.

In separate reporting, The Wall Street Journal indicated that one ongoing challenge has been recruiting the needed skilled and unskilled production workers required to match skill standards that are present in China. Another ongoing concern has been India’s logistics and transportation infrastructure and well as strict customs enforcement practices.

Both reports indicate Apple has established a goal for contract manufacturing partners located outside of China to be able to participate and collaborate in the company’s new product introduction (NPI) processes. That would allow such sites the ability to foster independent processes from that of China.

Apple declined to comment on either the Bloomberg or Wall Street Journal published reports.


Added Supply Chain Matters Perspectives

Positioning India as an alternative source for iPhone volume production is obviously a significant milestone from two dimensions.

It is a validation that Apple continues to move forward with a supply network risk mitigation and resiliency planning. It is estimated that China accounts for upwards of 95 percent of Apple’s final assembly production capabilities in 2021. India reportedly accounts for 3 percent of production capability.

In addition to India, Vietnam has been another area under consideration for component or final assembly production of Apple’s consumer electronics hardware products.

Second, this development is yet another sign that high tech manufacturers are giving added weighting to the possibilities of a decoupling of prior trade and production practices among China and the U.S. in the light of increased geo-political, industry competitiveness and government policy tensions.  The recent zero-tolerance adherence to Covid-19 outbreaks impacting China’s core manufacturing and logistics regions has provided added pause in assessing risk mitigation. So has the ongoing electrical power shortages impacting factories as a result of China’s largest heat wave in history.

From our lens, what remains unclear is whether Apple is practicing a sourcing strategy for producing hardware products in proximity to geographies of major consumer demand such as Europe and the United States. It is estimated that China is among the top two markets for Apple hardware, the other being the U.S.. There have obviously been opportunities in the past for positioning final assembly production in such regions. By relying on primarily Asia based sourcing, there is a continuing dependency on international logistics and transportation service and cost levels, not to mention broader and changing geo-political tensions.


Bob Ferrari

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