Labor Cost In India Is 3 Times Cheaper Than That In China, So Why Not Make iPhones Here?

As reported, starting in 2019, Apple will have its iPhone mass produced in India via Taiwanese manufacturer Foxconn.

During an interview with Bloomberg, Terry Gou, chairman of Foxconn Technology Group, said that they will start mass production of the iPhone here. Foxconn is Apple’s product largest assembler, and most of its manufacturing activities have focused on China.

Gou also said that Prime Minister Narendra Modi has invited him to the country following their expansion plans in India. Currently, Foxconn has Bangalore-based plants when it’s making iPhones, but older models only. What the news means is that the latest iPhone models will be made in India too. It is possible that the company will conduct production tests before launch the entire production at its facilities outside Chennai.

Gou said during an event held in Taiwan that the company will play a big role in the smartphone industry in India in the future, adding that it has moved its production line to the country.

So what is the possible reason behind this move and how does it affect Indian consumers?

For many years, China has been a rich source of cheap labor for the smartphone industry, as well as the world largest market for selling this type of products. However, in recent years, the country has witnessed stagnation in its demand for smartphones, especially the iPhone. It is because people are taking longer to replace their iPhones while many others are switching to cheaper Android phones with the same capabilities made by Chinese brands.

Therefore, India is now the world’s fastest-growing market for smartphones. And yes, we all know that Apple has had a hard time surviving in this market because of its eye-watering high prices. However, manufacturing locally can give Apple an advantage in such a price-competitive market like India.

Talking to Bloomberg, Counterpoint Research analyst Karn Chauhan in Gurgaon said:

And labor cost obviously plays an important role as it was the initial reason for China to become the world’s factory.

As a result and most importantly, the fact that Apple is manufacturing iPhone locally will help bring down the price of the iPhone, which means more consumers can get their hand on the premium handset devices and of course, more market share for the tech giant.

According to comments, Foxconn may spend around $300 million on this expansion, with more cash to expand their capacity. Plus, the company is talking with the Indian government about investments as well as subsidies.

Furthermore, if the iPhone maker meets the local sourcing quota of 30%, it can open Apple Stores in the country.