Envious neighbors: Apple is constructing a "home" in India.

Apple will build homes in India: Through its suppliers, Foxconn, Tata, and Salcomp, Apple is bolstering its footprint in India by investing in housing for its employees. This action demonstrates Apple's dedication to India and is consistent with its prosperous housing model in China. Apple presents a challenge to China's hegemony in electronics exports as it deepens its roots in India.

Apr 8, 2024 - 19:09
Apr 8, 2024 - 19:18
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Envious neighbors: Apple is constructing a "home" in India.

Apple is restating its dedication to the Indian market. suppliers and contract manufacturers, including as Foxconn, Tata, and Salcomp, intend to construct more than 78,000 dwellings for its workers. The project will be partially funded by the central and state governments of India. Apple is demonstrating that it is strengthening its ties to India with this massive housing project. One important component of the Apple ecosystem in China has been housing for employees.

Almost 35,000 of these will be used by Foxconn, the major iPhone supplier to Apple in India. Foxconn is situated in Sriperumbudur, Tamil Nadu. Currently, 41,000 people work at Foxconn, with 75% of them being women. At its Hosur complex, Tata Electronics is constructing 11,500 units for its staff to use. Tata mostly produces iPhone cases for both local and international markets. Salcomp, a company that produces enclosures, magnetics, and power adapters for Apple, plans to employ 3,969 housing units.

India adopted the China model

Foxconn, the business that supplies the majority of Apple's iPhones to India, adopted similar approach in China, housing employees close to the Foxconn factory and providing food and medical supplies under management.

Large-scale housing for employees would result in increased hiring, increased output, and, of course, Apple establishing a strong presence in India. India is determined to take a piece of high-quality manufacturing, like that of iPhones and semiconductors, and is practically like a company that builds a home for itself in India when business in China collapses due to geopolitical factors that reroute supply chains away from China.

The establishment of the Apple ecosystem in India would be a source of envy for China, which has been the main producer of Apple products until now. This is a significant indication that supply chains are moving to India, which Prime Minister Narendra Modi has been adamantly pushing as the "Made in India" strategy, with the goal of surpassing China as the world's manufacturer.

Two years prior, Foxconn was constructing worker dorms in India. At the time, analysts told  that Foxconn's construction of worker dorms in India does not automatically mean that the company is importing the Chinese model in its entirety. According to Prachir Singh, Senior Research Analyst at Counterpoint, it's "just an emulation of one part of a strategy that worked elsewhere."

When global manufacturers grow outside of their home country, they create strategies tailored to the labor laws, work cultures, and people practices of those new markets. Nevertheless, Singh stated that they would "adapt to the local environment rather than import a model they've perfected elsewhere."

As the largest iPhone factory in the world, Foxconn operates the "iPhone city" in Zhengzhou, the provincial capital of Henan, China. Almost 300,000 workers reside in dorms constructed on the manufacturing campus.

Massive on-site housing for employees is intended to increase worker efficiency by reducing commute time and giving workers—especially young ladies who travel from distant places to work in the factory—a sense of security.

Apple assists India in overtaking China in market share

China will be concerned about the Apple ecosystem taking root in India. According to a recent report, India has already begun to challenge China's hegemony in electronics exports.

Given the recent escalation of geopolitical tensions with China in the US and UK, the impact is most noticeable there. According to London-based Fathom Financial Consulting, the proportion of India's electronics exports to the US relative to China rose from 2.51% in November 2021 to 7.65% in November of last year, as reported by Bloomberg. The proportion increased from 4.79% to 10% in the UK.

Although Apple uses contract manufacturers in India to produce at least 7% of all of its iPhones, Samsung Electronics Co. has its largest mobile phone manufacturing located in India.

Andrew Harris, an economist at Fathom Financial Consulting, stated in a recent report that the increase in electronic exports is "probably the result of Foxconn's increasing investment in India." India produced an estimated 13% of the iPhones sold worldwide last year. The amount generated in India is anticipated to treble by the following year.

With Europe and Japan seeing less of India's market share gains, Harris said that India might shift toward "dual supply chains (China plus one) rather than a complete abandonment of China-based production, at least for the time being." According to the research, India's electronics exports to Germany accounted for 3.38% of China's total, and for 3.52% worldwide.

India's domestic electronics manufacturing is growing annually, producing an increasing number of components domestically. As a result, the country's imports of mechanics, vibrator motors, charger adapters, plastic parts, and other parts have decreased significantly in terms of both value and volume. According to data from the trade ministry, imports of fully packaged gadgets, including smartphones, fell 40% between April and January of FY24.

According to market trackers, the government's production-linked incentive (PLI) program drove a 5% annual increase in local manufacturing of electronics in 2023, particularly smartphones. This was due to more manufacturers sourcing components from local producers that had a significant impact on the bill of materials (BoM).

Apple emerges as the leading employer of labor

Apple has also demonstrated to India how to solve its employment crisis. India has been attempting to expand its manufacturing sector in an attempt to follow China's lead and exploit lower wages by hiring a large number of its youth. Since the launch of the production-linked incentive (PLI) program for smartphones in August 2021, the Apple ecosystem has directly hired over 150,000 individuals, making it the largest employer of blue-collar workers in the nation.

Government officials and specialists who are aware of the specifics indicated that the bulk of these are young people in the 19–24 age range who are looking for their first job. In addition, officials have projected that roughly 300,000 individuals have been indirectly employed.

In 2017, Apple started producing iPhones in India and increased local manufacture in line with the PLI program. Since then, it has collaborated with suppliers to make a growing number of components locally and use its contract manufacturers, Foxconn, Wistron, and Pegatron, to assemble the newest iPhone models.

China's fall for Apple

Apple is losing ground in China even as it establishes itself in India. Geopolitical unrest and the emergence of regional brands have hurt Apple's Chinese operations. Many believe that Apple's heyday in China is finished.

According to a Bloomberg article, iPhone shipments from China have been falling for three months running, with sales in February falling a startling 33% from the same month last year. This comes after declines of 30% in December and 39% in January. As to the article, several analysts anticipate that this declining pattern would persist until 2024, intensifying the 24% decline that Apple underwent in 2023.

In the first six weeks of 2024, Apple's iPhone sales in China decreased by 24% year over year, according to research firm Counterpoint, which was released early this month. According to Counterpoint's analysis, Apple's market share of smartphones in China fell to 15.7%, placing it in fourth place, down from second place a year earlier when it held a 19% market share. Apple is trying to recover market share by giving away steep discounts.

The decline in Apple's China sales highlights the difficulties the US company has in its third-largest market. In China, several government agencies and businesses have implemented policies restricting employee access to Apple devices, which is similar to US government bans on Chinese software due to security concerns. Last year, there were claims that eight provinces' worth of Chinese government-backed businesses and agencies asked their staff members not to bring in foreign electronics, including iPhones, for work.

The increasing rivalry Apple faces in China is the other main factor. Many things are adding to Apple's problems. First off, there is fierce competition from Chinese phone manufacturers like Huawei. Customers are interested in Huawei's newest Mate 60 series since it boasts a potent CPU produced in China. In terms of technology, a sense of nationalism has also taken hold in China.

According to the Counterpoint analysis, during the first half of 2024, Huawei, the main rival of the US tech giant in the Chinese market for high-end smartphones, saw a 64% increase in unit sales while iPhone sales decreased by 24%. Apple dropped to fourth from second place, while Huawei surged to the top as its market share increased to 16.5% from 9.4% a year earlier. Apple "saw intense competition from a resurgent Huawei at the high end and pressure from companies like OPPO, Vivo, and others in the middle due to aggressive pricing."

In this context, the revelation that Apple producers in India are constructing residences for its employees on-site highlights the gradual but substantial transition in manufacturing from China to India.

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