Shift in epicentre of iPhone activity to India threatens Chinese economy
On 10 January 2025, reports emerged that China had barred Chinese employees from travelling to Foxconn’s iPhone factories in India, while those already stationed there were being recalled. Additionally, shipments of specialised manufacturing equipment for making iPhones bound for India were halted, with Chinese authorities refusing to approve their export.
These restrictions on Chinese manpower and equipment exports were designed to hinder Apple’s plan to manufacture the latest iPhone 17 in India. By disrupting the supply chain, China aims to pressure Apple to reconsider its gradual transfer of operations to India. These actions reflect Beijing’s growing concern over New Delhi’s potential to emerge as a competitive manufacturing powerhouse for Western multinationals.
Apple’s iPhone
India has become a key production base for Apple in recent years, manufacturing 14 per cent of the world’s iPhones, a share expected to rise to 25-40 per cent in the coming years. Apple also produces iPads, airPods, and Apple watches in India. Between April and September 2024 alone, the company exported iPhones worth US$ 6 billion from the country. This increasing role in global consumer electronics production strengthens India’s position in the sector and reduces Apple’s dependence on China, ensuring supply chain stability.
China’s apprehensions are well-founded. At its peak production in 2017-18, Foxconn’s Zhengzhou factory employed 350,000 workers. Apple’s supply chain, comprising 150 Chinese suppliers and 259 factories, was the bedrock of employment across the Yangtze River Delta, Pearl River Delta and central and western China, supporting millions of grassroots workers. Yet by 2023, more than 200,000 Foxconn employees had been laid off, and several component suppliers in Zhengzhou either went bankrupt or moved to new sectors. In Apple’s long-term strategy, many of these jobs are gradually shifting to India.
Apple’s operations are helping to develop India’s smart technology industry. India already commands a strong IT foundation and a large engineering talent pool, making it well-positioned to benefit from Apple’s expanding operations. Foxconn alone has invested US$10 billion in India, employing 50,000 workers. Moreover, the defect rate in India’s iPhone production has lowered to the Chinese level, fostering direct competition.
The upcoming iPhone 17 is expected to integrate machine learning and AI to enhance image analysis and voice recognition, offering users a superior experience and developers better opportunities for innovation.
China is particularly concerned about Apple’s shift in its New Product Introduction (NPI) policy, previously exclusive to China, and now happening in India for iPhone 17. This transition could provide India’s software engineers a first-mover advantage, challenging China’s dominance in smart consumer technology.
Tunnel boring machines (TBM)
Chinese apprehensions extend beyond iPhones to the Tunnel Boring Machines sector, where similar restrictions are evident. On October 27, 2024, Commerce Minister Piyush Goyal had raised the issue of China’s export restrictions on German TBMs to India in a public meeting with Germany’s Deputy Chancellor, Robert Habeck. Herrenknecht AG, a leading German supplier, has played a crucial part in India’s infrastructure development, with 75 of its machines completing nearly 200 km of tunnels so far.
Until 2019, India relied significantly on Herrenknecht’s Chinese manufacturing units in Guangzhou and Shanghai for TBM imports. This dependence was especially critical for metro, roads and railway tunnels and strategically important mountain tunnels near the Line of Actual Control (LAC). After the Galwan Conflict and subsequent standoff, China gradually extended customs clearance times, restricting TBM exports to India. Beijing believes these machines are constructing mountain tunnels to facilitate troop movements along the LAC.
With India’s demand for TBMs set to rise due to upcoming high-speed rail and metro projects, dependence on China-controlled supply chains poses a serious risk. In a positive turn, Herrenknecht has decided to manufacture TBMs in Chennai for the Indian market, potentially proving to be a blessing in disguise. …to be continued