Now, China is looking for ways to stop Apple from moving its supply chain to India.
Apple is in the process of diversifying its supply chain from a China-centric model to one that operates from multiple locations. With Apple making significant progress in India, China is showing concern about the potential loss of investment and jobs for its citizens.
The Financial Times recently reported on the difficulties Apple has faced in making this change. Partly due to the tense political relationship between China and India and partly because the company does not want to offend the Chinese market.
The sensitivity of the relationship between the two countries is reflected in secret discussions between officials in Karnataka and Tamil Nadu, who replace Apple with “the fruit company,” even in private conversations. It also shows that China is aware of the threat India poses to its manufacturing dominance and is proactively addressing the issue.
In January, it was reported that China was tightening the export of key materials and high-tech equipment. This is the kind of hardware that Apple and its supply chain members use to make items for the iPhone and other products.
In addition, the Financial Times reported that this has affected people. The movement of some Chinese technicians into India has also been blocked by China. For Apple’s supply chain, these moves make it more difficult to quickly build up manufacturing in India to the same level as China.
With materials and equipment restricted, partners like Foxconn will have to find other suppliers that meet Apple’s exacting standards but aren’t affected by China’s interference.
This interference affects not only the supply chain but also Apple. This includes regulations in 2023 that ban the use of Apple devices by government officials. Then there are the regulatory requirements that make it difficult for Apple to operate in the country without adhering to strict restrictions.
The company’s push to include AI features in the iPhone has been hampered by regulations, forcing Apple to partner with a Chinese tech giant on the project. On the other hand, the Indian government has done a lot to help Apple set up and operate in India, including providing billions of dollars as part of the Production Linked Incentive program and easing restrictions that allow Apple to open its own exclusive stores in the country.
These incentives are not only aimed at getting Apple into India, but also at luring Apple suppliers to the country. The effort has also brought Indian conglomerate Tata into Apple’s already thriving manufacturing chain.
India is expected to supply more than 20% of global iPhone production by 2025. There are still some barriers in India, such as visa restrictions for Chinese citizens. While Apple’s assembly operations in China and Vietnam have a high proportion of women, social pressure also prevents women from doing the same in India.
Indian officials acknowledge that there is still a lot of work to do to become the large-scale supply base that Apple and other companies need if they want to move away from China. Many companies are also planning to expand into India and other countries, such as Vietnam, to reduce their risks.
After nearly a decade of building an extensive supply chain based in China, Apple has found itself in trouble. During the COVID-19 pandemic, the supply chain was affected by problems at Apple factories. Production lines at the facilities were shut down for extended periods, in part due to China's hardline approach.
As a result, Apple was forced to expand its supply chain to avoid similar incidents in the future. Another risk factor is geopolitical tensions, including the US-China trade war. Previously, during President Donald Trump's first term, Apple avoided the impact of tariffs on imports into the US.
During Trump's second term, the US could impose higher tariffs on imports from China. If Apple maintains iPhone production in China, it will be heavily affected by tariffs when shipping iPhones to US customers.
However, as Apple has focused on improving its manufacturing capacity in India, it will have to come up with a way to mitigate tariffs when importing from China. By setting up a manufacturing plant in another country, Apple will have to pay lower tariffs.
India has stepped in to address the tariff issue by preparing to cut import duties for Apple and other companies that make components and accessories.