India's slow progress in becoming a chipmaking powerhouse to rival China is bad news for Apple
- Things are getting complicated for Apple when it comes to the chip sector.
- Apple has long depended on China for manufacturing, but the relationship is getting complex.
There's a bit of a storm whipping around the chip sector in Asia right now. That makes things complicated for Apple.
Apple has been banking on India to emerge as a new global chip hub to help it reduce dependency on China, which Foxconn — a Taiwanese electronics giant and assembler of iPhones — helped turn into one of the world's most important manufacturing hubs for Apple.
Supply chain woes triggered during the pandemic by Beijing's persistent lockdowns, as well as rising geopolitical tensions thanks to China's hawkishness on Taiwan, have made the country an increasingly difficult one for Apple to tie its fortunes to, albeit one it is stuck with for some time.
Apple's most recent supplier list showed that around 150 of its suppliers, the vast majority, were located in China mainland during its 2022 fiscal year, while Chinese contract manufacturer Luxshare has been tasked with supporting the manufacturing of Apple's new Vision Pro headset.
But that isn't stopping Apple from thinking about production beyond China. Its supplier list in India and Vietnam collectively has slowly crept up in recent years — 39 in 2022 versus 18 in 2017 — while its list in China has seen a very gradual decline.
JP Morgan has previously estimated that as much as 25% of Apple's products could be made outside of China by 2025, up massively from the roughly 5% level it has hovered at since last year.
But unlike Vietnam, India has the economic might to pitch itself as a tech-manufacturing powerhouse with the heft to rival China – a role it no doubt relishes given its geopolitical battle with Beijing.
It's why Apple CEO Tim Cook spent some time in India in April, meeting Modi and building bridges with others such as Bollywood star Madhuri Dixit and billionaire tycoon Mukesh Ambani, who he was reported to have met in Mumbai.
Two recent developments suggest India's push to become a viable alternative to China — and benefit Apple — are mixed.
In a win for Indian prime minister Narendra Modi, the conglomerate Tata Group is reportedly in the final stages of talks to purchase an Apple supplier factory for around $600 million. If the deal goes ahead it would make it the first Indian company to move into local assembly of iPhones, Bloomberg reported.
The facility, which is in the southern Indian state of Karnataka and assembled the iPhone 14, is run by Taiwanese manufacturer Wistron.
But elsewhere, Taiwanese iPhone manufacturer Foxconn pulled the plug on its $19.5 billion-dollar joint venture with Indian conglomerate Vedanta on Monday, per Reuters, giving no reason for its decision to axe the project one year after its signing.
"Foxconn has determined it will not move forward on the joint venture with Vedanta," Foxconn said in a statement to Reuters.
That's a critical blow to Modi, who set out chip manufacturing as a strategic part of his ambitions to level up India.
The joint venture was meant to take up residence in Modi's home state of Gujarat, while enticing the likes of Europe's STMicroelectronics, a semiconductor manufacturer, to play partner in the development of a facility that could feasibly have put chips in everything from phones to cars.
Vedanta chairman Anil Agarwal tweeted that the joint venture meant "India's own Silicon Valley is a step closer now." That's a bit of a blowout now, and not just for Modi and Agarwal.
As much as Apple is tied to China for now, it will desperately want India to prove itself capable of building a manufacturing capacity that makes it a dependable, long-term partner in due course.
Sure, the joint venture wasn't directly connected to Apple, but it's something that will likely be watched very closely in Cupertino as a litmus test of India's ability to take its technological ambitions to new heights.