When the going turns good, even your staunchest of critics join in. Which is what Chinese companies are doing now to bolster Apple's India story
Over the past few weeks, a lot has been written about India’s productivity linked incentive (PLI) scheme that has caused a massive turnaround in India’s smartphone production. Companies like Apple and Samsung benefitted the most from the scheme to an extent that the government is now considering a larger outlay for it in its annual budget.
However, there is another aspect to the PLI scheme that is slowly coming out. More so in the case of Apple’s decision to shift some of its production out of China to India. It appears that some of its Chinese suppliers have now decided to enter India through joint ventures with local entities and propose to expand the supply chain for the iPhone maker.
Apple’s Chinese partners are coming in
A report published in the ET said the government has already afforded initial approvals to several of these Chinese players so that they can set up manufacturing facilities in India under joint venture. Looks like the government is also keen to further expand the local value chain for the iPhones in India, besides of course other products from the Apple store.
As many as 14 companies out of the 17 Chinese suppliers have approached the government for clearances and most of these have been accorded approvals, the report said quoting unnamed officials. Some of the names that came up include Sunny Opticals, Han’s Laser Technology, Yuto Packaging, Salcom and Bozon among others.
All part of an indigenization drive
Apple now produces more than 85% of its local smartphone sales in India as against importing more than 90% from across the border in China two years ago. Government data showed that its contract manufacturers led by Foxconn, had used the PLI scheme the best since its launch in October of 2020.
Additionally, the Cupertino-based tech giant created 150,000 direct and indirect jobs in India since August 2021 and ensured that the country’s handset exports rebounded strongly. In fact, per current estimates India’s mobile handset exports for FY 23 could well rake in beyond $9 billion, all thanks to their PLI scheme utilization.
There are some restrictions though
However, the government is reportedly clear that the Chinese companies would not be allowed to set up wholly-owned entities in India and that they have to operate only through joint ventures with local enterprises. The final nods to begin manufacturing of components would be given later, once the joint venture agreements are signed and sealed.
Those in the know suggest that India also wants it to be known that doing business with China is kosher so long as there is no threat to national security in the areas of operation. Additionally, the government also wants local supply chain champions to emerge over a period of time who can take their expertise to other parts of the world.
A key factor that went towards deciding this step is that local value addition alone could result in self-sufficiencies being developed in the field of electronics manufacturing. And without partners from China, it would be tough to develop a manufacturing ecosystem for Apple products in India.
Of course, it is not known whether Apple itself has played a role in this change of mind at the policy level. There is an outside chance that the company itself wanted to bolster local value addition at the iPhone manufacturing facilities in India from the present level of 18% to at least 50%, for which they require Chinese expertise and investments to flow in.
Sources in the know cited Luxshare Precision as an example of this. The company is a key partner in the Apple Watch manufacturing segment. We had recently reported on how Apple itself was looking to expand its manufacturing to include Watches and AirPods in India. So, it is hardly surprising that the government would approve the company’s proposal.