Apple Supplier Foxconn Reportedly Starts Producing iPhone 15 in India
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Apple (NYSE: AAPL) supplier Foxconn has reportedly started producing the upcoming iPhone 15 in India as US tech and manufacturing companies continue to diversify from China amid the growing US-China rivalry.
Separately, Foxconn is also looking to produce AirPods at its plant in Hyderabad in India. Foxconn has been ramping up its investment in India as Apple seeks to increase sourcing from the country while lowering its reliance on China.
The Indian government said earlier this year that Apple would produce a quarter of iPhones in the country. While that number looks farfetched, at least for now, analysts believe that Apple might source between 10%-15% of iPhones from India.
APPL increased sourcing from India
Responding to a question on shifting supplies from China, Cook said during the fiscal second-quarter earnings call, “We’re investing in the U.S. We’re investing in a number of other countries as well. And so, we make products everywhere. We’ll continue to invest everywhere. And we’ll continue to look for ways to optimize the supply chain based on what we learn each and every day and week and so forth to ensure that we can deliver the best products and services for our customers.”
Apple sees India as a major market
Apple sees India as a major market and opened its first two retail stores in the country earlier this year. After meeting Indian Prime Minister Narendra Modi during his India visit, Apple’s CEO Tim Cook tweeted, that Apple is “committed to growing and investing across the country.”
Notably, the opening of retail stores in India was a big step forward for Apple and analysts see it as a sign of the importance that it attaches to the country. Cook has talked up the potential of the Indian market multiple times previously also.
US tech CEOs including Cook, Microsoft’s Satya Nadella, and Alphabet’s Sundar Pichai met Modi on his state visit to the country. Cook described India as a “huge opportunity”
During the fiscal second quarter 2023 earnings call, Cook said that India is an “incredibly exciting market” and a “major focus” for the company.
India is now a top-five market for Apple
Cook added, “There are a lot of people coming into the middle class, and I really feel that India is at a tipping point, and it’s great to be there.”
Apple’s bet on India seems to be playing out well as the country is now among Apple’s top five markets.
According to Counterpoint Research, in the second quarter of 2023, iPhone shipments in India rose 50% YoY and the country accounted for 4% of global iPhone sales. The country has now overtaken European countries like France and Germany to become among the top five markets for iPhone.
Global smartphone sales have been weak
Global smartphone sales have been tepid and Apple is no exception. In its fiscal third quarter of 2023, Apple said that iPhone sales totaled $39.67 billion which was 2% lower YoY.
During the earnings call, Cook yet again talked about the opportunity in India and said, “We did hit a June quarter revenue record in India, and we grew strong double digits. We also opened our first 2 retail stores during the quarter. And it’s — of course, it’s early going currently, but they’re currently beating our expectation in terms of how they’re doing.”
AAPL stock has come off its highs
This year, Apple reached yet another milestone after its market cap closed above $3 trillion. It became the first company to hit that milestone – just as it was the first company to hit $1 trillion and a $2 trillion market cap.
However, the stock has come off its highs and it fell after releasing fiscal Q3 earnings as markets were spooked by falling hardware sales even as its Services business performed better than expected.
Analysts on Apple stock
Morgan Stanley believes that Apple is a “top stock” amid weakening broader markets. It said in a client note “A Catalyst Rich Event Path Supports Apple As Our Top Pick. … .Catalysts to drive a re-rating in [next twelve months] include 1) a stronger iPhone 15 cycle, 2) reaccelerating Services growth, 3) underappreciated [gross margin] tailwinds, 4) new product launches, and 5) a potential hardware subscription launch.”
Incidentally, Morgan Stanley is also bullish on the revenue opportunity in India. The brokerage expects Apple’s India revenues to grow at a CAGR of 20% and reach $40 billion in 10 years.
Going by the early signs, Apple’s bullish bet on India seems to be playing out well as the company continues to grow market share in the world’s most populous market.
As for increased sourcing from India, if the reports of Apple suppliers producing the latest iPhone 15 in India turn out to be true it would be a big milestone for the country as previously Apple suppliers produced iPhones in India after a lag of a few months.
