In a significant move to reduce its dependence on China as a manufacturing center, Apple has begun shifting the production of some flagship iPhone models from Foxconn in China to Luxshare in India. The decision comes as Apple seeks to diversify its suppliers and mitigate risks associated with relying heavily on a single manufacturing location.
The impact of the COVID-19 pandemic on the world's largest iPhone assembly plant in China highlighted the need for Apple to find alternative production hubs. The disruptions caused by the pandemic were estimated to cost the company approximately one billion dollars per week.
India has emerged as a crucial destination for Apple's manufacturing relocation efforts. Reports from last year suggested that a quarter of all iPhones could be produced in India by 2025, with projections indicating that this number could rise to half of all iPhones by 2027.
Recent developments reveal that Foxconn, Apple's primary iPhone assembler, has commenced the construction of two new iPhone plants in India. Furthermore, government incentives have paved the way for iPad production to also commence in the country.
According to a new investment note from renowned Apple analyst Ming-Chi Kuo, the company is ramping up high-end iPhone production in India while diversifying its suppliers. Luxshare, a Chinese company, has been promoted from a secondary supplier to a top-tier supplier, placing it on par with Foxconn.
Luxshare is now entrusted with a greater number of iPhone orders, including those for top-end models. Following an incident at Foxconn's Zhengzhou facility in November 2022, some iPhone 14 Pro Max orders have been transferred to Luxshare for risk diversification. Luxshare's improved production yield schedule for the iPhone 14 Pro Max has resulted in the company being awarded the iPhone 16 Pro Max assembly New Product Introduction (NPI) for 2024. NPI indicates that Luxshare is now entrusted with manufacturing top-tier models during their product launch period, a responsibility previously assigned to it only after launch.
This development signifies Apple's increased confidence in Luxshare, positioning it as an equal to Foxconn. Luxshare will also be responsible for manufacturing the iPhone 15 Plus models from their launch, followed by the addition of the iPhone 15 Pro Max. As a result, Luxshare's iPhone production is expected to more than double, growing from around 20 million units last year to 45-50 million units this year.
Looking ahead, Luxshare will be granted more prestigious orders than Foxconn for the production of iPhone 16 in India in 2024. The allocation of Indian iPhone assembly orders will be divided as follows:
While Luxshare may lack experience in navigating the political challenges involved in obtaining necessary clearances for new factories, it is expected that Apple will assist the company in this process.
Apple's strategic shift towards Indian production facilities and the elevation of Luxshare as a top-tier supplier not only reduces reliance on China but also signals the company's commitment to diversifying its supply chain and strengthening its presence in the Indian market.
