Tech industry travels the Silk Road
While there are other important players, Hon Hai Precision Industry/Foxconn is Apple’s biggest partner and now plans to invest $700 million in a new plant in India to boost production there.
This will be built on a huge 300-acre site near the airport in Bengaluru, Karnataka, and should create around 100,000 jobs. In contrast, Apple’s main iPhone factory in China currently employs 200,000. Foxconn has also committed to another factory in a neighboring state.
The new facility means India might produce 10% to 15% of the world’s iPhones. Given earlier reports putting that target at 25%, expect more investments of this kind. Already, Apple’s contract manufacturers export more than $2.5 billion worth of iPhones from India.
That decision follows literally dozens of accounts of Apple’s partners setting up shop in India, years of work on the part of Apple to get business moving in the nation, and the appearance of some big names from India’s manufacturing industry in the Apple supply chain.
Apple is pushing for this
Most manufacturers aren’t placing all their eggs in India’s basket. Foxconn recently announced a $300 million investment in Vietnam, as did AirPod maker GoerTek.
“We get requests from our clients almost every month. ‘Do you have any plans to expand to India?’” GoerTek Deputy Chairman Kazuyoshi Yoshinaga said.
While the client isn’t named, it’s not hard to speculate on the identity, given the rash of news from Apple’s Indian-bound supply chain.
I have been following Apple’s India journey since the beginning. The nation has a lot to offer — but there are numerous challenges to be overcome before Apple’s ambition to secure its supply chain on the basis of Indian manufacturing is achieved.
Challenges and opportunities
Traditionally, this has hampered the evolution of manufacturing, though India is offering financial incentives to tempt big name manufacturers to begin work there.
Can it become a tech industry powerhouse? India has many advantages.
India is an English-speaking democracy that has traditionally been friendly to the West — though not perpetually in sync. And while English is its primary language, the nation also has dozens of additional languages in use and a caste-based class system to challenge diversity and management targets.
It also has a large population, with another great advantage — the population trends young. That matters, given so many nations — including China — are now grappling with problems created by aging demographics. China’s National Bureau of Statistics tells us the nation’s population fell 850,000 in 2022. The thing is, as the number of available people declines, the cost of hiring them grows. And that’s even before you consider the calamitous human cost of COVID-19 on the nation.
Apple and its partners face another challenge — India’s tariff system. Not every component will or even can be made in India, and finding equitable resolution to tariffs forms an added challenge, particularly when you zoom into regional arrangements.
Infrastructure — energy, communications, roads, and rail — may also present a challenge, particularly when intra-regional rivalries get in the way.
An Apple partner might want to build a road between two regions, and even be willing to pay for it. But the project won’t move forward without permits. This may be why Foxconn is placing its new factory near the airport.
Education for all?
We know India has a great education system. Just look at the list of Indian-origin CEOs, including Sundar Pichai at Alphabet and Satya Nadella at Microsoft. You really don’t need to dig deep to find high-placed, highly effective leaders — but factories don’t just need leaders, they need educated workers, too.
In other words, Apple’s supply chain will need to raise a few boats to find the quality and quantity of workers it needs. I expect this will require a combination of deep investments in high quality on-site education for employees and their families, supplemented by extensive production line automation.