Apple opens its first flagship store in Mumbai and sees India as a key market for both consumer sales and potential manufacturing opportunities.

Apple's Expansion into India

## Newsletter

### Apple's Expansion in India: A Growing Market and Manufacturing Hub

This is the scene from the financial capital of India, Mumbai. On April 18, Apple opened its first flagship store in all of India. Amid huge fanfare, CEO Tim Cook was there to celebrate this milestone. He also opened up an Apple store in New Delhi, the capital of India. It was Tim Cook's first visit to India in 7 years.

**Key Insights**

- Apple sees data that the Indian consumer is ready to afford Apple products, leading to the opening of 2 retail stores within 48 hours of each other.
- The iPhone is a status symbol for many Indians, especially millennials and Gen Z.
- Tim Cook sees India as a key market for both consumer demand and potential manufacturing.
- Apple's iPhone remains its most important product, with revenue exceeding that of other products and services combined.
- Manufacturing iPhones requires a complex supply chain spread across several countries.
- India aims to produce 25% of the world's iPhones by 2025.

**Expanding Manufacturing in India**

- Apple began assembling the flagship iPhone 14 in India last year, diversifying its production away from China.
- India offers tax benefits and aims to attract foreign investments through initiatives like Make in India campaign.
- Infrastructure, talent, and regulations pose challenges for expanding iPhone manufacturing in India.

**Challenges and Opportunities**

- Apple faces competition from Android and Chinese smartphone players dominating the Indian market.
- Second-hand iPhones help bring customers into Apple's ecosystem, creating potential for future upgrades.
- Convincing Indian customers to switch from Android to Apple will require work and competitive pricing.

**Conclusion**

Apple's expansion in India signifies its recognition of the country's growing market and potential as a manufacturing hub. While challenges exist, the middle class is growing, and India could unlock significant sales and new Apple users. Time will tell if Apple can succeed in this endeavor.

Stay tuned for more updates on Apple's journey in India!


Apple's Expansion in India: A Growing Market and Manufacturing Hub

To compete with Chinese smartphone players

- Apple opened its first flagship store in Mumbai, India, and CEO Tim Cook also opened a store in New Delhi.
- This move indicates that Apple sees potential in the Indian market and believes that Indian consumers are ready to afford Apple products.
- India is seen as a key market for Apple, both in terms of consumer demand and as a potential manufacturing hub for iPhones.
- Currently, only a small fraction of iPhones are made in India, but the country aims to eventually produce 25% of the world's iPhones.
- Apple's decision to diversify production is partly due to disruptions in China and geopolitical factors.
- India's Make in India campaign aims to attract foreign investment and promote the country as a global manufacturing hub.
- Apple faces challenges in infrastructure, talent, and regulations when expanding iPhone manufacturing in India.
- The Indian smartphone market is dominated by Android and Chinese players, but Apple sees potential in the growing middle class.
- Apple hopes to attract customers through the secondhand market and gradually transition them to new iPhones.
- The success of Apple's manufacturing shift to India and its market expansion efforts remains to be seen.

It took seven years for Tim Cook to visit India again after traveling to the fast-growing country in 2016. Last April, the Apple CEO visited New Delhi and Mumbai to open two flagship stores, one in each city.

"Apple CEO Tim Cook actually traveled to India earlier this year to be in attendance for the opening of those two stores out in India, largely because of the massive opportunity that he sees out in India," said Angelo Zino, a senior analyst at CFRA Research. "In many respects, we are believers that India is going to represent a similar opportunity to China, and they also kind of represent very similar markets in nature."

Apple has been manufacturing older models of iPhones in India since 2017. In 2022, Apple began making the iPhone 14 in India, which was seen as a big shift in its manufacturing strategy. That year, about 3.5% of the world's iPhones were made in India. Apple eventually wants to manufacture 25% of the world's iPhones there.

"The major factor behind Apple's decision to diversify their production was they saw the impact of some of these disruptions in China that had to do with their Covid zero policy and a recognition of how vulnerable they were if they didn't have kind of a broader supply base, " said Willy Shih, Professor of Management Practice at Harvard Business School. "Without that broader supply base, they had production shortfalls which impacted their sales, which they might not have suffered as much had they had multiple sources."

Moving more iPhone manufacturing from China to India sounds like a good idea on paper. In the real world, it's plagued with serious challenges — finding talent, building out infrastructure and navigating a patchwork of regulations. Apple declined to CNBC's request for comment.

Watch the video above to find out why Apple is betting on India and the challenges it faces as it slowly shifts its manufacturing base from China to India.

Chapters: 
00:00 — Introduction 
01:22 — The iPhone economy
02:30 — Apple’s shift from China to India
05:40 — The Indian smartphone market
07:25 — What’s next? 

Produced and Edited by: Anuz Thapa   
Animation: Midnight Snacks    
Supervising Producer: Jeff Morganteen  
Additional Footage: Getty Images, Apple, Narendra Modi

» Subscribe to CNBC: https://cnb.cx/SubscribeCNBC
» Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision

About CNBC: From 'Wall Street' to 'Main Street' to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

Connect with CNBC News Online
Get the latest news: https://www.cnbc.com/
Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC
Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC
Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC
Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC

#cnbc 

Why Apple Is Betting Big On Making iPhones In India

This is the scene from the financial capital of India, Mumbai.

On April 18, Apple opened its first flagship store in all of India.

Amid huge fanfare, CEO Tim Cook was there to celebrate this milestone.

He also opened up an Apple store in New Delhi, the capital of India.

It was Tim Cook's first visit to India in 7 years.

And a lot of people may be saying, okay, why is he going in India?

What this tells me is if they're opening 2 retail stores within 48 hours of each other, they see data that the Indian consumer is ready to afford Apple products.

The Apple iPhone is a status symbol for a lot of you and everyone wants to have the best brand on them.

And they're very brand savvy, all these millennials, as well as Gen Z.

CEO Tim Cook actually traveled to India because of the massive opportunity that he sees out in India in many respects.

The reason really underscores Tim Cook's vision of India, that He sees it as a key market for the future in 2 ways.

Firstly, for the consumers and the growing appetite for consumers there to buy more expensive phones.

But secondly, he sees potentially a very key hub for Apple in terms of manufacturing those iPhones in the future.

Whenever people talk about Apple, the iPhone quickly becomes the main story.

The iPhone remains the company's most important product.

Its revenue exceeds the combined revenue of iMac, iPad, and other products and services.

IPhones are manufactured and made in quite a complex way because the supply chain is so diversified.

Apple designs entire products in-house, but it doesn't own a manufacturing facility.

So Apple might get the chips that power the iPhones made in Taiwan by TSMC, which is the world's largest contract chip manufacturer.

However, the screens for the iPhones might come from a range of suppliers in, say, Japan and South Korea.

You've got those memory producers out there and the likes of Samsung, among others, that help kind of produce the displays, which are among the most expensive components.

In a nutshell, it takes manufacturing bases spread across several different countries to produce a single iPhone.

3 Taiwanese companies Foxconn, Pegatron and Vistron are major players in iPhone production, where the assembly is done and shipped worldwide.

Apple has been manufacturing older models of iPhones in India since 2017, but only a very small fraction gets produced there.

In 2022, only about 3.5% of the world's iPhones were made in India.

India produced more than 6.5 million of the 200 million iPhones made globally.

India wants its factories to eventually produce 25% of the world's iPhones.

Morgan say the company could reach by 2025.

Well, Apple began assembling the flagship iPhone 14 in India last year, and it was the first time actually that the company produced its latest devices in the country so close to its initial launch.

Currently, only around 5 to 7% of iPhones globally are made in India.

The major factor behind Apple's decision to diversify their production was they saw the impact of some of these disruptions in China that had to do with their COVID 0 policy and a recognition of how vulnerable they were if they didn't have kind of a broader supply base.

Without that broader supply base, they had production shortfalls, which impacted their sales, which they might not have suffered as much had they had multiple sources.

Being in India is vital to Tim Cook and Apple for the production.

We saw that at the end of 2022 with the lack of iPhone 14s, you can buy specifically the pros, those high end, couldn't find them anywhere.

So moving to India, moving out of China for production, vital.

In addition to that, there are geopolitical factors at play right now that also needs to be accounted for.

And that's also kind of created a lot of risk out there for the supply chain and for Apple.

And an additional reason why a company like this needs to kind of shift some of their manufacturing capacity outside of China here.

India is also keen to attract foreign investments.

When Prime Minister Narendra Modi came into power in 2014, he initiated Make in India campaign.

The campaign aims to promote the country as a global manufacturing hub and attract foreign investment for new industries.

Apple's partner Foxconn, which recently announced investing $500 million to set up manufacturing plants in India has also been awarded tax benefits.

In his first state visit to the US this June, Modi made several top CEOs, making a pitch for investments in India.

He really cares about India because he's pushing us to make significant investments in India, which is something that we intend to do.

He wants to be open, he wants to be supportive of new companies, obviously, but at the same time make sure it accrues to India's advantage, which is obviously, that's the job.

It's really exciting to see the progress, his commitment towards the economic growth for India, and we are glad to be partners in the journey.

Incredible discussion and great state visit I think.

Well, you know, we opened 2 stores there when I was over there and we'll see.

It's just too expensive up until now basically for many Indians to be able to afford Apple products.

Can you guess what Apple's phone market share is in India Brian.

So Apple hasn't quite yet cracked the smartphone market in India.

Android and in particular, Chinese smartphone players are dominating the Indian market because they provide quite low cost handsets, but with very good specs that are appealing to the Indian consumer.

Still, smartphones priced under around $400 account for a huge bulk of the market, and that's where the Chinese players like Xiaomi have been very dominant.

Well, I think the second-hand market has been really very good for Apple because what it does is it brings customers into their ecosystem, into using their software and using some of their applications.

And by the way, some of these 3, five-year-old iPhones, they're really still very capable phones.

And to the extent that they can run the key apps and make those people Apple customers, maybe those customers can graduate to new iPhones over time.

If people are buying secondhand phones that are not the top of the line phones, they're still buying AirPods.

They're buying all around the ecosystem which is what obviously Apple and Tim Cook want.

The middle class is growing and that's why I think in order for Apple to be successful there it very much will come down to price point.

Listen 95 percent of smartphones in India are Android phones many of which are Chinese companies.

So it's going to take a lot of work to convince customers there that they should switch to Apple.

Moving more iPhone manufacturing from China to India sounds like a good idea on paper.

In the real world, it's plagued with serious challenges, infrastructure, talent and regulations.

I realize there's a lot of construction of infrastructure going on in India now, but China built a lot more infrastructure, especially in support of export operations when they could.

And India is really, frankly, quite far behind them.

And that means things for ocean shipping, container shipping of cargo, air cargo and so on, and road transport to efficiently move goods around.

As far as finding the workforce out in India and kind of finding the right talent out there, again, it's going to be extremely difficult.

It might be kind of the most toughest challenge out there.

And we do think they are looking to kind of get employees in different areas of the world, bring them to India and try to create the right atmosphere, get the right people to kind of get on board and try to resolve that issue.

But it's not something that you can necessarily solve overnight.

It's a multi-year kind of effort for the company.

There's not necessarily a solution out there.

It's 1 of those things where it's something they're just gonna have to work through and work hard through.

For Apple, most difficult has been having more control over its suppliers.

In India, it's more of a democratic country and there are state-level regulations, there are federal-level regulations.

So obviously there will be a lot of issues which is to be actually ironed out by Apple or Apple suppliers when they set up their facilities, when they look at for talent or hire the talent, increase their wages.

India is so important to Apple because it gives the iPhone maker a new manufacturing hub to diversify away from China where there are many risks.

Also India could unlock hundreds of billions of dollars of new sales for Apple as well as create hundreds of millions of new Apple users.

Whether Apple can succeed, only time will tell.


Speaker 0: This is the scene from the financial capital of India, Mumbai. On April 18, Apple opened its first flagship store in all of India. Amid huge fanfare, CEO Tim Cook was there to celebrate this milestone. He also opened up an Apple store in New Delhi, the capital of India. It was Tim Cook's first visit to India in 7 years.

Speaker 1: And a lot of people may be saying, okay, why is he going in India? What this tells me is if they're opening 2 retail stores within 48 hours of each other, they see data that the Indian consumer is ready to afford Apple products.

Speaker 2: The Apple iPhone is a status symbol for a lot of you and everyone wants to have the best brand on them. And they're very brand savvy, all these millennials, as well as Gen Z. IPhone is their most aspirational phone.

Speaker 3: CEO Tim Cook actually traveled to India because of the massive opportunity that he sees out in India in many respects.

Speaker 4: The reason really underscores Tim Cook's vision of India, that He sees it as a key market for the future in 2 ways. Firstly, for the consumers and the growing appetite for consumers there to buy more expensive phones. But secondly, he sees potentially a very key hub for Apple in terms of manufacturing those iPhones in the future. Those iPhones in the future.

Speaker 0: Whenever people talk about Apple, the iPhone quickly becomes the main story. The iPhone remains the company's most important product. Its revenue exceeds the combined revenue of iMac, iPad, and other products and services.

Speaker 4: IPhones are manufactured and made in quite a complex way because the supply chain is so diversified. Apple designs entire products in-house, but it doesn't own a manufacturing facility. So Apple might get the chips that power the iPhones made in Taiwan by TSMC, which is the world's largest contract chip manufacturer. However, the screens for the iPhones might come from a range of suppliers in, say, Japan and South Korea.

Speaker 3: You've got those memory producers out there and the likes of Samsung, among others, that help kind of produce the displays, which are among the most expensive components.

Speaker 0: In a nutshell, it takes manufacturing bases spread across several different countries to produce a single iPhone. 3 Taiwanese companies Foxconn, Pegatron and Vistron are major players in iPhone production, where the assembly is done and shipped worldwide. Apple has been manufacturing older models of iPhones in India since 2017, but only a very small fraction gets produced there. In 2022, only about 3.5% of the world's iPhones were made in India. India produced more than 6.5 million of the 200 million iPhones made globally.

India wants its factories to eventually produce 25% of the world's iPhones. It's a goal that analysts at J.P. Morgan say the company could reach by 2025.

Speaker 4: Well, Apple began assembling the flagship iPhone 14 in India last year, and it was the first time actually that the company produced its latest devices in the country so close to its initial launch. Currently, only around 5 to 7% of iPhones globally are made in India.

Speaker 5: The major factor behind Apple's decision to diversify their production was they saw the impact of some of these disruptions in China that had to do with their COVID 0 policy and a recognition of how vulnerable they were if they didn't have kind of a broader supply base. Without that broader supply base, they had production shortfalls, which impacted their sales, which they might not have suffered as much had they had multiple sources.

Speaker 6: Being in India is vital to Tim Cook and Apple for the production. Right. We saw that at the end of 2022 with the lack of iPhone 14s, you can buy specifically the pros, those high end, couldn't find them anywhere. And that was because of the China issue. So moving to India, moving out of China for production, vital.

Speaker 3: In addition to that, there are geopolitical factors at play right now that also needs to be accounted for. And that's also kind of created a lot of risk out there for the supply chain and for Apple. And an additional reason why a company like this needs to kind of shift some of their manufacturing capacity outside of China here.

Speaker 0: India is also keen to attract foreign investments.

Speaker 7: Narendra Damodardas Modi.

Speaker 0: When Prime Minister Narendra Modi came into power in 2014, he initiated Make in India campaign. The campaign aims to promote the country as a global manufacturing hub and attract foreign investment for new industries. Apple's partner Foxconn, which recently announced investing $500 million to set up manufacturing plants in India has also been awarded tax benefits. In his first state visit to the US this June, Modi made several top CEOs, making a pitch for investments in India.

Speaker 8: He really cares about India because he's pushing us to make significant investments in India, which is something that we intend to do. He wants to be open, he wants to be supportive of new companies, obviously, but at the same time make sure it accrues to India's advantage, which is obviously, that's the job.

Speaker 7: It's really exciting to see the progress, his commitment towards the economic growth for India, and we are glad to be partners in the journey.

Speaker 9: Incredible discussion and great state visit I think.

Speaker 10: Plans to further expand in the country?

Speaker 9: Well, you know, we opened 2 stores there when I was over there and we'll see. I think it's a huge opportunity.

Speaker 1: It's just too expensive up until now basically for many Indians to be able to afford Apple products. Can you guess what Apple's phone market share is in India Brian. No 4 percent 4 percent 4 percent. And that's because a lot of percent.

Speaker 4: So Apple hasn't quite yet cracked the smartphone market in India. It has just about a 4% market share. Android and in particular, Chinese smartphone players are dominating the Indian market because they provide quite low cost handsets, but with very good specs that are appealing to the Indian consumer. Still, smartphones priced under around $400 account for a huge bulk of the market, and that's where the Chinese players like Xiaomi have been very dominant.

Speaker 5: Well, I think the second-hand market has been really very good for Apple because what it does is it brings customers into their ecosystem, into using their software and using some of their applications. And by the way, some of these 3, five-year-old iPhones, they're really still very capable phones. And to the extent that they can run the key apps and make those people Apple customers, maybe those customers can graduate to new iPhones over time.

Speaker 6: If people are buying secondhand phones that are not the top of the line phones, they're still buying AirPods. They're still buying iPads. They're buying all around the ecosystem which is what obviously Apple and Tim Cook want.

Speaker 10: The middle class is growing and that's why I think in order for Apple to be successful there it very much will come down to price point. Listen 95 percent of smartphones in India are Android phones many of which are Chinese companies. Chinese smartphones. So it's going to take a lot of work to convince customers there that they should switch to Apple.

Speaker 0: Moving more iPhone manufacturing from China to India sounds like a good idea on paper. In the real world, it's plagued with serious challenges, infrastructure, talent and regulations.

Speaker 5: Number 1 is infrastructure. I realize there's a lot of construction of infrastructure going on in India now, but China built a lot more infrastructure, especially in support of export operations when they could. And India is really, frankly, quite far behind them. And that means things for ocean shipping, container shipping of cargo, air cargo and so on, and road transport to efficiently move goods around. So infrastructure is a big problem.

Speaker 3: As far as finding the workforce out in India and kind of finding the right talent out there, again, it's going to be extremely difficult. It might be kind of the most toughest challenge out there. And we do think they are looking to kind of get employees in different areas of the world, bring them to India and try to create the right atmosphere, get the right people to kind of get on board and try to resolve that issue. But it's not something that you can necessarily solve overnight. It's a multi-year kind of effort for the company.

There's not necessarily a solution out there. It's 1 of those things where it's something they're just gonna have to work through and work hard through.

Speaker 2: For Apple, most difficult has been having more control over its suppliers. In India, it's more of a democratic country and there are state-level regulations, there are federal-level regulations. So obviously there will be a lot of issues which is to be actually ironed out by Apple or Apple suppliers when they set up their facilities, when they look at for talent or hire the talent, increase their wages.

Speaker 4: India is so important to Apple because it gives the iPhone maker a new manufacturing hub to diversify away from China where there are many risks. Also India could unlock hundreds of billions of dollars of new sales for Apple as well as create hundreds of millions of new Apple users. Whether Apple can succeed, only time will tell. Thank you. Thank you.

Thank you. Thank you.

See all CNBC transcripts on Youtube

Why Apple Is Betting Big On Making iPhones In India