Apple's production shift to India stalls
Tech giant struggles to reduce dependence on China amid challenges in India
Gabriel Thomas (GT)May 10, 2025
Apple's efforts to move manufacturing to India and reduce its dependence on China are stalling. The company has sent engineers and designers from California and China to factories in southern India to train locals and set up production. While Apple has been making lower-end iPhones in India since 2017, the company is now building its operations in the country, following the example it set in China two decades ago: Engineers and designers often spend weeks or months at a time in factories overseeing production.
By shifting production to India, Apple is trying to overcome its reliance on a China-centric supply chain strategy. The shift follows a months-long disruption at Covid-19 that led the company to report its first decline in quarterly revenue in three and a half years earlier this month. Apple is now focusing on diversification in India as the country is on track to overtake China as the world's most populous nation this year.
However, Apple has faced several challenges in its attempt to expand manufacturing in India. One of the biggest challenges is the quality of the production line. At a case factory in Hosur, run by Indian conglomerate Tata, only about one in two components that come off the line are in good enough condition to eventually be sent to Foxconn, Apple's assembly partner for building iPhones. That 50% yield does not compare well with Apple's goal of no defects. Two people who have worked at Apple's offshore operation said the factory is on a plan to improve performance, but the road ahead is long.
Logistics, customs and infrastructure have also posed challenges for Apple. One person involved with Apple's business said the process of expanding into India has been slow in part because of these challenges. Apple's diversification into Southeast Asia has been smoother thanks to the Regional Comprehensive Economic Partnership, a free trade agreement among 10 regional countries. In addition, the Indian government has made significant efforts to encourage companies to take advantage of Apple's need to diversify from China.
Despite these challenges, Apple has big ambitions in India. In Apple's financial results conference call earlier this month, CEO Tim Cook said he was "very optimistic about India. He called the market "tremendously exciting" and "an important focus." The company also plans to open its first Apple Stores in India to further expand its presence in the country.
Although there are teething problems, analysts believe India's potential for Apple is enormous. Global consulting firm Bain estimates that manufacturing exports from India could more than double from $418 billion in 2022 to more than $1 billion in 2028, driven by policy support and low costs. Exports of electronics products alone are expected to grow by up to 40% annually. The Indian government is also encouraging companies to take advantage of Apple's need to diversify from China.
Mark Zetter, president of Venture Outsource, a consulting firm for the contract electronics industry, said inertia has been a problem for years. When Zetter did research for Indian think tank Gateway House five years ago, he found that contract manufacturers "often claim they can meet every need of an electronics customer." But in reality, he said, they are slow to respond to customer requests after contracts are signed and lack the flexibility to react to changes.
Despite the challenges, Apple's expansion into India is likely to be successful, especially as the company tries to reduce its dependence on China. India may not be the same size as the Zhengzhou factory in China, which employs about 300,000 people, but it is a fast-growing market with great potential. Analysts believe Apple will succeed in establishing a robust production facility in India, especially as the country's manufacturing sector continues to grow.
