In the span of recent years, the Indian landscape has undergone a remarkable transformation, shifting from a mere receptor of smartphones to a pivotal nucleus for smartphone assembly. While Samsung, a prominent player in the tech domain, has orchestrated the production of its latest premier devices – encompassing the illustrious Galaxy S23 Ultra and the innovative Galaxy Z Fold5 and Galaxy Z Flip5 – within the Indian borders, its rival, Apple, is progressively elevating its manufacturing endeavors on Indian soil.
Breaking new ground, Apple is embarking on a groundbreaking venture by emboldening the assembly of a forthcoming iPhone iteration directly within the Indian domain, a venture unprecedented in its history. Despite this, Apple’s initial concentration rests upon the rudimentary version – the iPhone 15 – rather than its advanced Pro editions. A comprehensive exploration into the rationale behind Apple’s strategic expansion to encompass the iPhone Pro models within India’s precincts is in order.
Mitigating Financial Peril and Augmenting Supply Chain Tenacity
Following the launch of the iPhone 14 Pro and 14 Pro Max in the bygone September, these incarnations encountered an unprecedented surge in demand. However, the all-encompassing influence of COVID-19 restrictions and labor-related tribulations at the manufacturing enclaves in China, where these smartphones are meticulously fashioned, cast a profound shadow. Apple bore the brunt of stock scarcities, leading to substantial financial upheaval for the tech juggernaut. On the 6th of November, 2022, Apple issued an official proclamation, acknowledging the transient impediments brought about by COVID-19 restrictions upon the primary assembly facility for the iPhone 14 Pro and iPhone 14 Pro Max, nestled in Zhengzhou, China. This facility was operating at a significantly diminished capacity.
“Apple had meticulously orchestrated the unveiling of its cutting-edge flagship models, but owing to complications at the assembly locale in China, a staggering number of units of the acclaimed iPhone 14 Pro and Pro Max remained absent from the Q42022 (October-December) landscape. Consequently, each instance where the iPhone 14 Pro or Pro Max remained undelivered due to scarcity translated to a financial shortfall exceeding $1 billion,” elucidates Danish Faruqui, the Chief Executive Officer of Fab Economics – a consultancy firm specializing in semiconductor ecosystems. Wary of revisiting last year’s missteps, Apple must contemplate extending its Pro model assembly beyond China’s borders. In this context, India emerges as a compelling alternative for the assembly of iPhone Pro and Pro Max models, presenting commensurate OPEX and CAPEX cost structures for assembly operations, he asserts.
The impending iPhone 15 Pro and Pro Max incarnations will boast the A17 Bionic, a marvel wrought on the TSMC 3nm (N3B) technology node. This marks a pivotal juncture where Apple surges ahead of its rivals in semiconductor technology integration, a core facet of its products. As most competitors are harnessed to Snapdragon 8 Gen 2, fabricated on TSMC’s 4nm (N4P) technology node, Apple garners an unassailable competitive advantage in 2023. Thus, a robust supply chain strategy becomes an imperative, ensuring a seamless journey to the end consumer. “Having dominated the spectrum spanning Semiconductor Chip Design, Fab, Chip Assembly, and Test, Apple finds itself in a position where the inability to furnish its patrons with the flagship iPhone 15 Pro and Pro Max models during Q4 2023 due to over-reliance on a solitary nation’s assembly capabilities would be far from an optimal outcome,” Faruqui expounds.
US-China Semiconductor Spat
The escalating tensions between the United States and China have precipitated a significant conundrum within the semiconductor landscape. In October 2022, the US instituted a prohibition forbidding its citizens and enterprises from engaging with Chinese semiconductor enterprises involved in advanced chip fabrication without securing a specialized export license. China, in a retaliatory maneuver, has imposed restrictions on the import of gallium, germanium, and the corresponding chemical constituents pivotal for chip production. This rift is poised to exacerbate further. Faruqui adds, “The US Department of Commerce, through a series of sanctions administered by the Bureau of Industry and Statistics, has set in motion a trajectory aimed at relocating the forefront of logic, memory, analog, and beyond away from China. The overarching directive revolves around diversifying the leading-edge product value chain, dismantling the dominion of China. The assembly of iPhone Pro models in India, showcasing the apex of semiconductor technology (3 nm), aligns seamlessly with Apple’s strategic ‘China-plus-One’ initiative. This alignment reflects the broader directive of minimizing the vulnerability of supply chains linked to strategically significant spheres, echoing the stance endorsed by the US government.”
In light of the plausible challenges that await Apple on the horizon, the technological powerhouse headquartered in Cupertino must cogitate over the prospect of shifting the assembly of forthcoming iPhone 15 Pro models to the Indian terrain. While the industry leaders exude optimism regarding the impending transition, insiders familiar with Apple’s operational dynamics, in a tête-à-tête with Business Today, divulged that immediate plans to relocate the assembly of iPhone 15 Pro models to India remain elusive.