Apple is considering shifting its manufacturing capacity to India, and if reports are accurate, Apple could move nearly a fifth of its capacity from China to India.
Apple's supply chain consists primarily of Asia-centric component production and assembly, with the vast majority of it taking place in or near China.
There have been reports that the company is planning to diversify its supply chain into other countries, but a report on Monday suggested that India could be the biggest potential location for such a move.
Executives of an iPhone manufacturer have been in talks with top Indian government officials for the past few months, according to the Economic Times of India. At the heart of the talks is the possibility that Apple will expand its local manufacturing in India, possibly aiming to move about a fifth of its existing manufacturing capacity in China to India.
Officials noted that this would amount to $40 billion in local manufacturing revenue over the next five years and could make Apple India's largest exporter.
"We expect Apple to produce $40 billion worth of smartphones for export, primarily through its contract manufacturers Wistron and Foxconn," an official claimed, adding that this is "an effect brought about under the Production-Linked Incentive (PLI) program." The PLI program is designed to provide incentives to companies to encourage manufacturing growth in the region.
Another official said India "is not a big market for Apple because the company sells only a small percentage of its total output in India" and that Apple's use of India as a base for production and exports "is essentially diversifying its production away from China."
Apple has already made some iPhone production in the country, though not enough to meet market demand at the moment. Apple reportedly sells about $1.5 billion worth of iPhones in India every year, with a market share of between 2 and 3 percent, compared to less than $500 million worth of iPhones produced locally in India.
To achieve the goals set out in the report, Apple will need to invest heavily in local production in India, including expanding its local supply chain.
To take advantage of the government's PLI program, Apple also needs to phase in at least $10 billion worth of iPhones between 2020 and 2025 to meet annual targets. When the target is met, the actual incentive will be between 4 and 6 percent of the incremental sales of domestically produced goods in the base year.
