Apple’s interest in diversifying the production of its devices beyond China is clear. Your suppliers know this and we have seen and continue to see movements in this line. Movements such as Pegatron buying land for new factories in the country or Apple has obtained incentives to accelerate the landing of iPad production in India.
Economy, costs and especially greater stability
Concentrating the production of products in a single country or region carries certain risks. We do not need to refer to the trade war between the United States and China, or even the pandemic and its effect on production, something as simple as a storm can prevent finished products from taking off from airports or a failure in the power grid can stop production for several days.
In this sense, to be able to diversify production among several countries and facilities enables the supply chain to function more efficiently and stably. Something that Apple, like all companies, undoubtedly want. Within this context, we have seen several moves by the Cupertino company to bring production of devices to India. A requirement even to open the first official stores in the country.
In 2016 Apple asked the government for financial incentives to assemble some iPhone models in India. The government gave no such incentives, but Apple went ahead anyway and started local production of the iPhone SE. Later, the country allowed Apple to import iPhone components – remember how widely distributed the supply chain for components is in different countries – without having to pay extra taxes.
Concentrating the production of products in a single country or region carries certain risks. Thanks to production incentives from the Indian government, Apple plans to bring more iPad production to the country, a move that its three main suppliers are already beginning to execute.
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Last year the government of the India announced a program to incentivize companies to improve the volume of local smartphone production. Something that now, as reported to us Reuters, will be extended to tablets, computers and servers. A move that, if confirmed and carried forward, would give the green light to Apple’s plans “to take the manufacturing of the iPad to the South Asian country.”
Incentives that are already paying off
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In parallel, Pegatron, Apple’s second largest supplier behind Foxconn, has invested 14.2 million dollars to buy the rights to a piece of land where to build a factory. This facility is located in Chennai and will be dedicated, as far as we know so far, primarily to the production of the iPhone.
Production would start during the second half of 2021 at the earliest and would employ approximately 14,000 workers. Let’s remember that in June of last year Pegatron created a new subsidiary, Pegatron Technology India, and that at the end of 2020 its board approved the investment of 150 million dollars to build its first iPhone production plant in the country.
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With Pegatron there are three participants, adding Foxconn and Wistron, who are ready to enter the incentive program of the Indian government. A program that will undoubtedly benefit Apple in terms of supply chain stability and also the country, which is slowly becoming a reference electronics production center in the world.
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