June 14, 2023
India has the potential to become a credible global supply chain alternative for mobile phones and electronics
India's contribution to Apple's global iPhone sales would exceed 5% by CY25
Apple is expected to gain further market share due to the affordability of locally made iPhones and a shift towards premium products
India's electronics consumption reached US$ 158 billion in FY23
Apple may shift more than 18% of its iPhone production to India by FY25, a significant increase from the current 7% in FY23, according to a report by Bank of America.
This shift will be driven by the production-linked incentive (PLI) targets set by the Indian government, which are encouraging companies to establish their supply chains in the country. The success of mobile phones in India is expected to lead to the relocation of global supply chains.
India has the potential to become a credible global supply chain alternative for mobile phones and electronics. Experts mentioned that if Apple’s vendors expand their operations in India, India’s contribution to Apple’s global iPhone sales would exceed 5% by CY25 with a compound annual growth rate (CAGR) of 21% over the next three years .
Moreover, Apple may also gain more market share due to the affordability of locally made iPhones and a shift towards premium products.
India’s production value-add is relatively low at 18% compared to China’s 38% and Vietnam’s 24%. However, to counter this, localizing 70% of the cost of mobile phones—including display, memory, and chips—would be challenging in the near term due to the need for significant capital expenditure and advanced technology.
The report also highlighted India’s growing mobile phone exports, which doubled year-on-year to reach US$ 1 billion per month, leading to an expansion in the overall export mix of locally produced goods from 16% to 25%. Efforts to reduce imports could potentially reduce India’s current account deficit by US$ 112 billion over five years and provide stability to exchange rates, the rupee, and stimulate growth in the capital expenditure, credit, and logistics sectors. Additionally, diversifying supply chains for global brands and contract manufacturing firms could be another benefit.
India’s focus on scale and its PLI scheme targeting major players like Samsung and Apple’s contract manufacturers can help the country achieve its targets of $126 billion in mobile phone production and $55 billion in mobile phone exports by FY26. Samsung and Apple’s contract manufacturers, including Foxconn and Pegatron, accounted for 80% of
India’s US$ 11 billion mobile phone exports in FY23.
The expansion of manufacturing in India has the potential to create a robust vendor ecosystem, but attention should be given to factors such as policy stability, labour productivity, and last-mile connectivity.