Reports indicate that Apple’s strategy to increase iPhone production in India from an estimated 15% of global output now to 25% by 2027 is being systematically obstructed by the Chinese government.
China is allegedly employing a combination of three tactics to complicate the transfer of Apple’s production to India …
iPhone Production in India
For years, Apple has been seeking to reduce its reliance on China for manufacturing, a concern heightened by the pandemic which underscored the risks associated with concentrating so much production in one nation.
India serves as the company’s second manufacturing hub, with Apple gradually increasing production from the iPhone SE to now producing its latest flagship models. Reports have suggested that Apple aims to manufacture 25% of its iPhones in India by 2027.
The Indian government has actively encouraged this expansion by offering various tax incentives on imported components.
China Deliberately Impeding This Shift
According to two reports from the Financial Times, it appears that China is attempting to hinder this relocation of production.
Firstly, it is claimed that the Chinese government is restricting engineers’ ability to travel to India.
Beijing is tightening its control over advanced Chinese technology, striving to keep essential knowledge within its borders as trade tensions with the US and Europe escalate. In recent months, Chinese authorities have made it increasingly challenging for certain engineers […] to depart the country […]
Among those affected is Foxconn, Apple’s primary manufacturing partner, which has been leading the efforts to diversify the supply chain into India.
Secondly, they are employing export controls to obstruct or delay the transfer of machinery and components.
Chinese officials have proposed new export controls to retain critical battery technologies and are restricting the technologies necessary for processing essential minerals, according to various industry representatives and governmental notices […] An Indian official also alleged that China was manipulating customs delays to obstruct the shipment of components and machinery to India.
Lastly, Chinese component manufacturers are reportedly being cautioned against setting up production facilities in India, which would prevent Apple from bypassing export restrictions by sourcing components locally.
The reports indicate that the current trade conflict with China, initiated during the Trump administration, has heightened tensions and prompted a firmer stance from the government toward American corporations.
Indian Government Not Assisting in Certain Areas
Although the Indian government has been eager to attract foreign companies to establish manufacturing in the country, the FT notes that political tensions with China have led to the obstruction of Chinese firms from setting up new operations.
Apple supplier Luxshare is mentioned as one of the companies denied permission.
DMN’s Perspective
It was anticipated that China would not remain passive as Apple shifted an increasing amount of production abroad, so it was always likely that the government would devise means to complicate matters for the iPhone manufacturer.
However, given the current trade war, we should expect progressively tougher actions from Chinese authorities against US companies, and Apple is undoubtedly a primary target. Unless there are significant changes in policy from Trump, which seems unlikely at the moment, we can expect conditions to grow more challenging.
Photo by Ximena Ibañez on Unsplash
