Looking at the Apple Pivot

During last week’s Q4 earnings call, Apple CEO Tim Cook said that revenue from India was at an all-time high.

On the supply side also, Apple is tilting toward India.

Apple in India

At just 5 percent in 2022, iPhone production in India could leap to 25 percent during the next two years. Referring to the switch from China, Time called it a “pivot.”

Most recently, we were told that Tata, India’s massive conglomerate, will now manufacture iPhones for domestic and global markets. Having purchased the facilities that had been assembling iPhones since 2017, Tata will become the first company in India also to manufacture them. According to The Economic Times, Tata plans to “woo” companies like Apple from China to India. Including Foxconn and Pegatron, it will be one of three major multinationals doing business with Apple in India.

Now though, Taiwan based Foxconn dominates Apple India. With 17,000 employees, it annually assembles 6 million older models. Expecting new iPhone 14 and 15 orders, they are expanding their factory complex in Sriperumbudur far beyond its current capability. Satellite photos display massive construction. Correspondingly, with plans to hire many thousands more, news reports say they could be building hostels that accommodate 60,000 workers. Their goal for 2024 is 20 million iPhones.

Highlighted in red, the Foxconn facilities are in southern India:

Our Bottom Line: Trade Reallocation

Apple is not alone. Its concerns with Covid shutdowns, the Trump era tariffs, and the possibility of a Taiwan invasion are more widespread.

In a September 2023 NBER working paper, two economists cite a shift to Vietnam and Mexico. Reminding us that all too recently, we extolled GVCs (Global Value Chains), now our enthusiasm is much more restrained. Reasons include weather disruptions, public health shocks, and geopolitical risk. Then, when we add the loss of U.S. jobs and a U.S. China chill to all of that, we wind up with global trade reallocation.

Stepping back, the bigger picture reveals continuing trade relationships with other high income countries. Even when Japan and Canada lost some import share to China and Mexico during the 1990s, still they remained important trading partners. Although anti-globalization has been in the news, still, the paper’s authors say statistics indicate U.S. goods imports were at a record high in 2022.

But we do have a massive shift away from China. While China’s share of U.S. imports was at 21.6 percent in 2017, the number plunged to 16.5 percent in 2022.

In red, China’s downward sloping import share was massive:

Meanwhile below, you can see the China numbers starting to recede from their 2017 22 percent high:

So, while India is not listed as a beneficiary of the great reallocation, indeed, thinking of Apple, it could be.

My sources and more: Conveying the whole Apple pivot to India picture, their investor call cited revenue while these articles, here, here, and here, focused on their supply chain. Related, WSJ detailed how China is limiting foreign tech. And finally, with this new NBER paper, we could see how Apple’s pivot relates to the great reallocation.