Apple faces big challenges in building a supply chain in India

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Apple is doing all it can to grow in India.
Illustration: Cult of Mac

Apple became a trillion-dollar tech giant thanks to its deep and intricate ties to China for manufacturing and component supplies.

But a coronavirus that began in China has left that giant a little shaky on its feet and dizzy from renewed questions over why Apple hasn’t developed a more diverse strategy for building the world’s most popular personal computing devices.

It’s definitely not from a lack of trying as pointed out Thursday in an article by The Information, which took a deep-dive into Apple’s arduous path through India.

The fast-spreading virus shuttered factories in China that will need weeks to return to full capacity. The virus has also halted critical travel of Apple employees to set-up production of upcoming products and has left device inventories and repair parts in short supply.

The blows were so heavy, Apple told investors it would not meet revenue goals for the March quarter.

Apple in India, a tale in time and investment

Foxconn, Apple’s biggest iPhone partner in China, was able to move some manufacturing to India as the coronavirus threatened to shut down and delay production.

Apple has suppliers all over the world, but no country is home to as many Apple suppliers as China, where the majority of the world’s iPhones are made.

Apple has 135 major suppliers in China. India, where Apple recently began assembly of some older iPhone models, has just seven.

The Information’s Wayne Ma described a discouraging trip to India by a team from Apple several years ago. Apple was looking to invest big India but found that its smartphone infrastructure could only support a handful of components. They could not find suppliers for phone speakers, headphones and various small mechanical parts, Ma wrote.

“Many Indian suppliers weren’t able to meet Apple’s environmental, health and safe standards,” he wrote. “Apple contractors visited one potential factory in the southern Indian state of Karnataka, only to find workers were on strike.”

There were other challenges, including suppliers who missed trial deadlines and outside investors not interested in making the big investment in India. The government also puts a 20 percent tax on imported parts to make smartphones.

Other companies tried manufacturing in India only to leave because of the stiff challenges.

“The biggest challenge for Apple may simply be the less developed nature of manufacturing in India compared to China,” Ma wrote. “This situation is a legacy of protectionist trade policies and bureaucratic interference. Many smartphone component factories in India, for example, are still operated by Asian or European companies that have long-standing relationships with well-known consumer brands and years—if not decades—of manufacturing experience.”

Apple is putting in the time and money into India. Three older models of iPhones, mostly for the Indian market, are assembled in India and the government has signaled it will work with Apple to lure more manufacturing contracts.

Source: The Information