Apple to shift 10% of manufacture to India in 5 years

Two of Apple Inc’s global vendors — Wistron and Foxconn (through Han Hoi), which already manufacture Apple phones in India — and a third entity, Pegatron, which will be setting up a new plant, have applied to the government to be eligible under the PLI scheme for large-scale electronics manufacturers.

Apple Inc is expected to manufacture mobile phones in India, with an incremental production value of a $29 billion in the next five years, mostly for the export market. This is based on eligibility under the Production Linked Incentive (PLI) scheme, which closed on July 31.

The move will help the company shift production from China, where around 95 per cent of its mobiles are currently manufactured, say analysts. They point out that India could constitute around 10 per cent of Apple’s global production at the end of five years because, if things go well, the production value could hit much higher.

An Apple spokesperson did not respond to an email query.

Two of its global vendors — Wistron and Foxconn (through Han Hoi), which already manufacture Apple phones in India — and a third entity, Pegatron, which will be setting up a new plant, have applied to the government to be eligible under the PLI scheme for large-scale electronics manufacturers.

The scheme provides financial incentives of 4-6 per cent to players who want to make India a global hub for manufacturing and exports.

Analysts who watch Apple say it will scale up its production gradually, especially as Pegatron, the new player in India, will take time to set up its manufacturing facility. Pegatron has only just registered its Indian subsidiary and is scouting for land to set up a plant.

However, while Apple will start slow in the first year, analysts believe it will reach peak production levels by the third year to meet the PLI norms. They estimate that the production value could easily go up beyond $29 billion in five years if everything remains on track.

Analysts estimate that the free-on-board value of Apple phones manufactured in China is estimated at $50-60 billion annually. So, at an average annual production value in India of around $6 billion (depending on the final production value), India would constitute around 10 cent of the company’s production, based on current levels.

The direct and indirect jobs it will create, say analysts, could be to the tune of 240,000, based on government overall projections of jobs that will be created through PLI.

The PLI scheme for mobile devices has attracted the attention of another global player, South Korean giant Samsung, which has invested Rs 5,000 crore in a mobile plant, virtually doubling its capacity in the country.

For global players to benefit from the scheme, they have to make phones with a production value of over $200, a slot into which all of Apple’s phones fall. There are also various investment and production value conditions.

Those who track the company in India estimate that Apple sells over 1.5 million phones in the US. It has a minuscule share of the Indian smartphone market, where over 150 million smartphones are sold annually.

Currently, Apple also manufactures and exports its mobile phones, including the new iPhone 11, but in very small quantities from India.

The total exports of mobile phones in India stands at a mere Rs 27,000 crore as of 2019-20. The PLI scheme is expected to give a big fillip to the sector.

The new electronics policy is targeting exports of mobile phones worth $110 billion by 2025. That will make India the largest exporter, behind China but ahead of its current rival Vietnam, which will be pushed into third place.

Source: Read Full Article