Apple Shifts iPhone Production to India Amid Concerns About China

Prime Minister Narendra Modi meets Xi Jinping, President of China in Wuhan, China. 

Photo: John Pollock / Ministry of External Affairs

As Apple looks to shift production away from China due to a series of economic and political misfortunes, they have begun to move larger amounts of iPhone production to India.

Recent reports indicate that 2023 will see a 150% increase in iPhone production in India. This is a part of Apple’s long-term goal of shipping 45% of iPhones from India, up from a current 2-3%. 

The change comes among larger efforts from US companies to decrease risk by avoiding reliance on Chinese markets. This shift also indicates Apple’s increased focus on providing devices to Indians. In the past few years, India has been exponentially growing its sales in India. For example, iPhone sales in India grew 100% YoY from 2020 to 2021. Establishing a greater physical presence in India will help facilitate the distribution of Apple devices to Indian consumers.

The shift also comes amid fears about the future of Chinese productive capacity. The past couple of years have been an increasingly tumultuous time in China, as the country has continued its controversial Zero Covid policy, even in the country's largest economic hubs.

Beijing has only doubled down on promises to keep the economy locked down to combat Covid in recent weeks. In addition to the concerns produced by the Zero Covid policy, the Chinese real estate market has recently faced challenges as property values have collapsed. The collapse has sparked fears of recession, with investors wary of declining real estate markets after similar trends triggered the 2008 Great Recession and decades of languish in Japan.

This shift also comes in the wake of greater scrutiny towards Chinese economic data. Over the past 10 years, China has disclosed increasingly little about its economic data, making evaluation of the Chinese economic outlook less precise. 

Recently, China announced a delay in releasing third-quarter economic data. In addition, studies have indicated that Chinese economic growth has likely been greatly exaggerated over the past few decades due to incentives for local governments to artificially inflate their production numbers. Although the exact extent of these exaggerations is unclear, some evidence suggests that China’s GDP could be only about half the reported figure.

Worker in an industrial factory in India. Photo: Ray Witlin / World Bank

Meanwhile, India’s economic outlook has remained more stable. The country benefits from starting at a lower baseline, but India’s economic growth is projected to remain at about 7% in the near term. While India was the world’s 11th largest economy a decade ago, the country recently surpassed the United Kingdom to become the world’s fifth largest economy. 

The large, young population of India has been a key driver of this growth. It is possible that India has actually surpassed China in population, as the latter’s population data has come under increased scrutiny. In addition, investments into critical infrastructure, such as an over 50% increase in the length of the national highway network since 2014 have helped India continue to sustain its growth. Financial infrastructure has also kept pace with the economic growth of the country, as the Indian government has made developments in raising the number of Indians with banking access.

In light of the recent changes to both countries, Apple’s shifting production strategy is likely to only hasten unless there are major changes to China or India. If this trend continues and expands to other large companies, it could indicate continued troubles for China while promising large amounts of economic growth for India.