Tata’s New iPhone Assembly Plant To Boost Apple’s India Expansion; Mobile Industry Pushes For Policy Shift To Counter China’s Competitiveness

Tata Group is set to enhance Apple Inc.’s expansion in India by planning the construction of one of the country’s largest iPhone assembly plants. 

The conglomerate intends to establish this facility in Hosur, located in the southern Tamil Nadu state, as part of Apple’s strategy to increase manufacturing activities in the South Asian region. 

Sources familiar with the matter suggest that the plant, expected to become operational in 12 to 18 months, will house approximately 20 assembly lines and employ around 50,000 workers within the first two years.

This move aligns with Apple‘s broader initiative to diversify its supply chain and reduce reliance on China, as it collaborates with manufacturing partners in India, Thailand, Malaysia, and other locations. 

Tata Group, which already owns an iPhone factory in Karnataka acquired from Wistron Corp., is working to strengthen its partnership with Apple by increasing its presence in the Indian market. The conglomerate has accelerated hiring at its existing Hosur facility, which currently produces iPhone enclosures, and plans to launch 100 retail stores dedicated to Apple products.

In light of Prime Minister Narendra Modi’s production-linked subsidies, which have incentivized Apple’s key suppliers like Foxconn Technology Group and Pegatron Corp. to increase operations in India, the tech giant assembled over $7 billion worth of iPhones in the country during the previous fiscal year. 

The move has significantly boosted India’s share of iPhone production to approximately 7%, reducing dependence on China, which historically handled the entirety of iPhone assembly.

The new iPhone assembly plant proposed by Tata is expected to be of medium size on a global scale, surpassing the existing Wistron-acquired facility, which employs over 10,000 individuals, yet smaller than Foxconn’s largest facilities in China. 

As the construction timeline aligns with the expiration of previous state-backed financial incentives, it is likely that Apple and Tata will seek government support, potentially in the form of subsidies for this venture.

The Mobile Phone Industry’s Accelerated Growth Pitch

Simultaneously, the mobile phone manufacturing industry in India is advocating for a competitive tax and tariff regime to counterbalance the dominance of countries like China and Vietnam in the global market. 

India’s mobile phone manufacturing sector and amplify its presence on the global stage, the mobile phone industry has engaged in crucial discussions with key government bodies, including the Ministry of Electronics and IT (MeitY), the Finance Ministry, and NITI Aayog.

Over the past two weeks, industry leaders have advocated for a strategic shift in focus and policies to enhance India’s export competitiveness, emphasizing the need for targeted interventions to leverage the country’s strengths in the sector.

Presentations made during these engagements highlighted a critical industry trend—domestic mobile phone sales have reached a plateau in the last two years; with 99% of all mobile phones sold in India being domestically manufactured, industry stakeholders accentuated the importance of new subscribers or replacements to drive additional production, investments, and job creation, primarily through exports.

As of the end of FY23, a substantial 25% of total mobile production in India, amounting to nearly Rs 90,000 crore, was directed towards exports. The industry’s pursuit of a $50-billion export target in the coming years is fueled by a proactive approach to tapping into global value chains (GVCs), building a robust ecosystem, and increasing domestic value addition.

The India Cellular and Electronics Association (ICEA), representing major mobile phone brands and contract manufacturers, has identified a pressing need for a tax and tariff regime that rivals those offered by competing manufacturing destinations such as China and Vietnam. 

Hence, to achieve this, the industry is urging the government to prioritize predictability, rationalize tariffs, enhance ease of doing business, and foster rapid competitiveness.

Data shared by ICEA indicates the phenomenal growth in domestic production, which surged nearly 20 times from Rs 18,700 crore in 2014 to a staggering Rs 3,50,000 crore at the end of 2022-23. 

However, the recent slowdown in domestic consumption, except for the premium segment dominated by Apple, Samsung, and OnePlus, has prompted industry leaders to seek policy interventions for sustained growth.

In the wake of the COVID-19 pandemic, the mobile phone industry demonstrated resilience by swiftly shifting focus to building an export portfolio. 

The production-linked incentive (PLI) scheme, particularly geared toward smartphone manufacturing, was pivotal in attracting global players like Apple to relocate a portion of iPhone production to India. 

As the industry endeavours to secure a competitive position in the global market, its ongoing dialogue with the government aims to shape policies that foster innovation, growth, and sustained success in the highly competitive mobile phone manufacturing sector.

The Last Bit, India’s mobile phone industry, is at a pivotal juncture; recognizing the plateau in domestic mobile sales, industry leaders emphasize the imperative of focusing on export-driven growth. 

Notably, 99% of mobile phones sold in India are domestically manufactured, linking all additional production, investments, and job creation to export endeavours.

At the close of FY23, a noteworthy 25% of total mobile production, amounting to almost Rs 90,000 crore, was exported, with iPhone exports contributing nearly half. 

Despite sluggish domestic consumption, especially in non-premium segments, the industry aims to propel exports to a $50-billion mark in the coming years.

The India Cellular and Electronics Association (ICEA), representing major brands and manufacturers, accentuates the need for a competitive tax and tariff regime akin to China and Vietnam. 

To achieve this, the industry’s call for policy interventions focusing on predictability, tariff rationalization, ease of doing business, and heightened competitiveness is valid.

Amid a swift post-pandemic recovery, the industry’s focus on building an export portfolio aligns with the success of the smartphone production-linked incentive (PLI) scheme. 

Global players, including Apple, have shifted production to India, signalling a robust trajectory despite a remarkable 20-fold increase in domestic production from 2014 to 2022-23; recent consumption slowdown, excluding the premium segment, prompts industry leaders to seek sustained growth through policy interventions.