Apple is far from diversifying from China despite India’s expansion


Apple’s first physical retail store is located in the populous city of Mumbai.

Punish Paranjpe | AFP | Getty Images

For years, Tim Cook has been optimistic about India. Now he’s betting big on the South Asian giant like Apple diverts its attention from China and expands its footprint in India.

Still, analysts told CNBC that the iPhone maker’s reliance on China will persist for years.

India has the potential to “become the next China” for Apple production, but it could take up to a decade before that happens, said Martin Yang, senior emerging technology analyst at Oppenheimer & Co. .

Apple is set to open its second Indian retail store in Delhi on Thursday, two days after opening its first in Mumbai.

The Cupertino-based tech giant still has a strong presence in China through its supply chain partners, and China’s infrastructure capabilities are still far better than what India can offer, Nitin Soni, senior director of Fitch Ratings, told CNBC.

“It will take years for Apple to diversify outside of China,” Soni said. “The country is still a very big pocket for Apple – not just in the assembly line, but also in the semiconductor ecosystem and testing.”

Apple’s efforts to move its product assembly from China have become more urgent over the past five years as U.S.-China trade tensions escalate and supply chain disruptions caused by Beijing’s zero Covid policy have collapsed. The iPhone maker had to cut production in China due to the restrictions, a move that hurt its bottom line.

Population growth and sheer opportunity around India is the golden goose for Apple.

Dan Ives

Wedbush Securities

It’s also highly unlikely that Apple will be able to completely eradicate its reliance on China, said Navkendar Singh, associate vice president of International Data Corporation (IDC) India.

“Given the scales of cost, logistics, and the sheer inertia of some of the ecosystem vendors in China, it’s highly unlikely that Apple can pull out of China entirely,” Singh pointed out.

Nevertheless, Apple’s growth in India has only just begun and many opportunities await in both manufacturing and retail sales in the country.

Apple’s ambitions for India

India is the world’s second-largest smartphone market by annual shipments and sales, accounting for nearly 12% of the global market, according to IDC data.

According to the market intelligence company, Apple shipped 6.7 million iPhones in 2022 from India, an increase from 4.8 million devices in 2022. It ranks sixth after the United States, China, Japan, the United Kingdom and Germany for global iPhone shipments in 2022. .

“Population growth and pure opportunity around India is the golden goose for Apple. It has been a difficult market for Apple to develop on the iPhone front over the years, but it is clearly beginning find your rhythm,” said Dan Ives, an analyst at Wedbush Securities. , said.

India’s rising middle class

IDC data showed that Apple only holds a 5% market share in India as low to mid-priced devices continue to be consumers’ top choices.

However, the nation’s growing adoption of the technology and increased consumer spending power will drive increased iPhone sales, Fitch’s Soni said.

“We’re seeing the middle class getting more affluent and moving towards the upper middle class, and there’s a growing trend of customers buying flagship smartphones,” Soni said. “It is also facilitated by the fact that 4G is now readily available across India.”

Apple unlikely to lower product prices in India, analyst says

But cheaper labor costs in India will not reduce the costs of Apple’s iPhones as customers would be willing to pay high prices for Apple products, Singh said.

Apple will not achieve “mass market price,” he said. “It remains a premium brand and they would like to keep that brand halo in place.”

Singh added that the company could instead offer programs or bank reconciliations to make the products more affordable.

– CNBC’s Arjun Kharpal contributed to this report.

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