Apple and Amazon Keep India’s Tech Manufacturing Running Full Steam Ahead
Last September, I wrote an in-depth piece on whether Apple will ever choose India over China. This was, and still remains, a challenging question because the US tech giant carries out nearly 90 percent of its manufacturing in China.
However, a number of reasons contributed to Apple’s interest in India: Trump’s trade war and the Covid-19 pandemic, both of which affected Apple’s supply chain in China, attractive financial incentives provided by the Indian government, and the tremendous potential that India’s 1.3 billion strong population holds for Apple’s future.
Apple began expanding its manufacturing in India in late 2019 when Foxconn, Apple’s largest contract manufacturer, started producing the iPhone XR in a plant outside the southern Indian city of Chennai. Apple’s efforts picked up pace in July 2020 during the peak of the pandemic. Foxconn pledged $1 billion to expand operations and Pegatron, Apple’s second-largest contract manufacturer, registered a subsidiary in India. A few months later, Wistron, another major Apple contractor, began assembling Apple’s latest iPhone SE and started the trial production for the iPhone 12 in its newly built factory near Bangalore. Then in September, Apple, for the first time, opened its online store in India allowing it to directly sell to customers rather than through partners.
Setback at Wistron
But all the frenzy came to an abrupt halt on the night of December 12, 2020, when around 2000 employees working at Wistron’s facility in the outskirts of Bangalore ransacked the factory over unpaid wages. Videos from the night show disgruntled workers trashing offices, breaking equipment, looting phones, and setting cars on fire. The total damage was estimated at $7 million.
Apple immediately put Wistron on probation and the government began investigating the incident. The government probe later revealed serious lapses by the management and Wistron issued an apology for the events that led to the riot. The company continues to be on probation while it makes changes to prevent such an incident from occurring in the future.
This incident cast a bad light on Modi’s efforts to bring foreign companies to India but did not have any material impact as Apple continued to increase its presence in India through its other suppliers.
Pegatron follows up with more concrete steps
After registering a subsidiary in India last year to hint at its interest in the country, Pegatron took a more definite step earlier this year by leasing half a million square feet of land near the southern city of Chennai, not too far away from Foxconn’s factory.
Pegatron has received approval from its board to invest around $150 million to set up production on this land. Construction began in January and production is expected to begin in the second half of 2021. Once up and running, this facility will employ 14,000 workers. Pegatron is also said to be looking for another plot of land to set up its second Indian factory.
Apple looks for a new iPad and Mac base
Just as news about Pegatron’s activities was making rounds, Apple also made headlines for expressing interest to manufacture iPads and Macs in India. Currently, Apple’s iPads and Macs are mostly manufactured in China, with few production lines in Vietnam.
One of the major reasons smartphone manufacturers are setting up shop in India is because of the Modi government’s $6.6 billion production-linked incentive (PLI) scheme. This is part of the government’s Make in India drive and as per the scheme, five global smartphone manufactures will be given direct financial incentives ranging between 4 percent to 6 percent of additional sales of goods made locally over the next five years.
The Indian government is now looking to launch a similar scheme targeting manufacturing of products like tablets and laptops. The new scheme will initially have a budget close to $1 billion and is expected to launch by the end of February. But Apple is lobbying to push the budget to $2.7 billion before the plan is finalized. If all goes to plan, Apple’s three most popular devices will soon start churning out of Indian factories.
Growth in component manufacturers
Currently, most of the components that go into an iPhone are imported from China. This has been a long-standing problem that held Apple back from stepping into India for many years. But component manufactures are slowly setting up production in India and Tata Sons is leading the way for local companies.
Tata Electronics, a subsidiary of Indian giant Tata Sons, began seeking loans to establish a manufacturing facility in Tamil Nadu to make iPhone components. Foreign companies that have shown interest in manufacturing components in India include Salcomp (chargers), Cheng Uei Precision Industry (cable and connector), Avary Holding and AT&S (printed circuit board), YUTO Packaging Technology (packaging), and Sunwoda Electronic and Flex (battery). Apple is banking on the growth in component manufacturers to properly diversify its supply chain away from China.
Amazon’s Fire TV Stick finds a new home
While one can find just about anything one wants on Amazon, the e-commerce giant’s best-selling products are its own lineup of devices. Year after year, the top-selling products are Echo Dot, Fire TV Stick, and Kindle. All these devices have for long been made in China and Amazon faces the same problem Apple does in this regard. Like Apple, Amazon has set its eyes upon India.
On 16 February, Amazon announced that it is setting up its first manufacturing line in India. Amazon will start production through its contract manufacturer, Cloud Network Technology, a subsidiary of Foxconn. The new factory will be around Foxconn’s existing iPhone assembling facility in Chennai. The factory will focus on producing Amazon’s Fire TV Stick, while other devices are expected to follow.
“Amazon is committed to partner with the Indian government to advance the vision of an Aatmanirbhar Bharat [self-sufficent India] . . . Today, we are delighted to announce Amazon’s first manufacturing line in India to produce hundreds of thousands of Fire TV Stick devices every year catering to the demands of the Indian customers. This further reiterates our commitment to the Government of India's ‘Make in India’ initiative,” said Amit Agarwal, Global SVP and Country Leader for Amazon India.
As states across the country are battling to bag the next big manufacture by showering upon them perks and tax benefits like none before, all these major investments are more evidence that India is becoming a high-tech manufacturing hub that can compete with the likes of China. As with everything else, only time will tell if India succeeds at this or not.