Apple's Strategic Shift: India Emerges as Key Manufacturing Hub and Growth Catalyst

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According to Bloomberg, Apple's primary manufacturer, Foxconn, plans to assemble the latest iPhone Pro and Pro Max models at its factory in Tamil Nadu, southern India. The facility has already trained thousands of workers for this purpose and aims to align production with the global launch date. This marks a significant milestone, as it signifies that India has become capable of producing Apple's full range of iPhones, a crucial step in the company's supply chain diversification strategy. Additionally, this is a notable achievement for Indian Prime Minister Modi, who has been working to attract high-end manufacturing industries to the country.

Over the past year (ending March 2024), the value of iPhones manufactured in India reached $14 billion, accounting for approximately 14% of global shipments. The standard iPhone 16 is also expected to be produced in India and launched simultaneously worldwide. Besides Foxconn, Taiwanese firm Pegatron and Indian conglomerate Tata Group may join the production of the iPhone Pro series, further solidifying Apple's supply chain presence in India.

Internal plans indicate that by the end of this year, locally produced iPhones in India will be sufficient to meet domestic demand, helping to avoid import taxes and reducing the price of Pro models by around 10%. However, due to the import of many components and India's tax structure, the Indian version of the iPhone 16 Pro series may still be more expensive than in certain zero-tariff regions.

The Indian-produced iPhone Pro series is primarily intended for export to markets such as Europe, the Middle East, and the United States, as the demand for premium smartphones within India remains relatively small.

Apple's revenue in India surged by 33% last year, reaching nearly $8 billion, indicating that India is poised to become a key growth market for the company. As the Indian middle class expands and payment options diversify, it is anticipated that Apple's revenue in India will reach $33 billion by 2030.

Deepening its supply chain in India offers two significant benefits for Apple. First, it mitigates geopolitical risks. Given China's higher geopolitical risk, reducing dependency on China can help lower valuation concerns related to these risks. However, China remains a critical manufacturing base for Apple, and there is no indication that the company will exit the country in the foreseeable future.

Second, it alleviates concerns about growth. Apple has faced criticism for its sluggish growth, particularly in China, where it faces increasing competition from domestic brands. With declining population growth and market saturation in China, Apple's growth potential is becoming limited. In contrast, India, with its growing population and rising middle class, presents a high-growth market where Apple currently has a low market share. As a result, India is poised to become a key driver of Apple's future growth. It is likely that in upcoming earnings calls, investor focus on India's growth will surpass that of China.

Moreover, this development reduces the threat posed by AI smartphones to Apple. Investors are currently hoping that new AI-powered phones will spur an upgrade cycle and boost Apple's growth. Even if the AI smartphone upgrade trend does not meet expectations, the long-term growth trajectory of the Indian market is certain, meaning Apple will not have to rely solely on AI smartphones, reducing uncertainty. This is a favorable outcome for investors, one that warrants attention.