For several years Apple is mulling shifting its production outside China. The trade war between the US and China and the recent coronavirus outbreak have forced Apple to think about decentralizing its supply chain.
As such, the Cupertino company has been looking towards establishing a supply chain in India. However, Apple has been dismayed with the results and seems to have put India plans on the back burner.
A new report from The Information sheds some light on the situation:
Several years ago, employees at Apple investigated whether components for the iPhone could be made in India. The results weren’t encouraging. While the employees found some companies that could make power adapters or packaging, none could make phone speakers, headphones or small mechanical parts. Many Indian suppliers weren’t able to meet Apple’s environmental, health and safety standards. Apple contractors visited one potential factory in the southern Indian state of Karnataka, only to find that its workers were on strike. Some of Apple’s existing suppliers said they weren’t interested in manufacturing in India because of the investment required, The Information has learned.
The report notes that while a Chinese worker at a Wistron factory could make $700 USD a month, an Indian worker doing the same job would only make a quarter of this. However, cheap labour costs are offset by the fact that Apple has to import all of its components into the country for assembly, triggering heavy customs duties as well as shipping and storage costs. Indian labour laws also prevent workers from taking on more overtime compared to Chinese workers.
The Cupertino company cites a slew of challenges that stopped it from ramping up production in India, realizing that the manufacturing sector in India was underdeveloped when compared to China.
The report highlights an instance in which Apple visited a supplier called “Superpacks” in 2018:
Apple sent auditors to assess whether its supplier responsibility practices were up to Apple’s standards. The audits revealed dozens of violations. The site had no safety measures for storing chemicals, lacked monitoring for noise and wastewater, and didn’t have several environmental and construction permits. It didn’t properly test drinking water for workers and the site lacked a fire hydrant system, according to a person close to Apple.
Furthermore, bureaucratic hurdles and protectionist trade policies further played spoilsport. According to the report, a majority of smartphone component manufacturers in India have Asian or European roots. Other companies tried manufacturing in India only to leave because of the stiff challenges.
“The biggest challenge for Apple may simply be the less developed nature of manufacturing in India compared to China,” reads the report. “This situation is a legacy of protectionist trade policies and bureaucratic interference. Many smartphone component factories in India, for example, are still operated by Asian or European companies that have long-standing relationships with well-known consumer brands and years—if not decades—of manufacturing experience.”