Luxshare, a crucial player in the Chinese Apple supply chain, is facing challenges in its Indian expansion plans due to the strained relations between China and India. Several Indian media outlets reported that Luxshare has revised its initial investment plan of $330 million, opting to forgo establishing manufacturing facilities in India, stating, “This decision is a setback for India.”

Following these reports, Luxshare clarified on the evening of the 20th that the mentioned reports are inaccurate, emphasizing that Luxshare has not made any $330 million investment decisions in India.

Akin to Taiwanese companies, Chinese companies have been establishing manufacturing facilities in India in recent years as Apple gradually diversifies its supply chain to Vietnam, India, and other locations, reported by ET Telecom. Earlier this year, the Indian government tentatively approved approximately 14 Apple suppliers from China, including Luxshare and Sunny Optical.

However, the condition for approval required these Chinese companies to form joint ventures with local businesses, becoming a hindrance for Chinese investments in India. As a result, some companies are exploring alternative locations. On November 9th, the Bac Giang Industrial Zones Authority in Vietnam announced that Luxshare would make an additional investment of $330 million to construct new production facilities in the province. Indian media interpreted this change in plans by Chinese companies as “India’s loss and Vietnam’s gain.”

In June of this year, Luxshare shareholders expressed concerns about the company’s recent challenges in India. However, Luxshare’s top management emphasized the necessity of comprehensive guarantees in investment, politics, customer relations, and other aspects before contemplating the establishment of manufacturing facilities in India. Currently, Luxshare remains focused on consumer electronics in Vietnam, while maintaining automotive and communication production lines in Mexico.

Chinese media also highlighted that, amid the current tensions in Sino-Indian relations, another major Apple supplier in China, BYD, is facing a similar situation. Previously, BYD planned to expand its presence in India and attempted to establish an iPad assembly line in February 2021. However, BYD announced that this investment had shifted to Vietnam in May, with plans to invest USD 184 million in the production of electronic components.

(Image: Luxshare)

According to IJIWEI News, two Indian government officials have revealed that India is considering Tesla’s request to reduce import duties on electric vehicles as an enticement for the company to establish a factory in the country.

Tesla has reportedly indicated that establishing a facility in India hinges on government concessions regarding import duties. Officials mentioned that Tesla insists on “at least a duty relaxation for a certain transition period” and added that “there would be sunset clauses.”

Currently, India imposes a 70% tax on imported cars under $40,000 USD to support the local automobile industry, while those above $40,000 USD face a 100% duty. India is contemplating reducing tariffs on all electric vehicles to 15%, regardless of their selling price, although there’s no unified consensus within the government.

As reported, the proposing officials hope that the aforementioned legislation will not only benefit India but also other qualifying manufacturers, instead of favoring a specific company alone.

Previously, there were reports suggesting Tesla’s intention to establish a factory in India for manufacturing low-cost electric vehicles, catering to the domestic market and planning for exports. However, Tesla’s 2022 plans for reduced import duties on electric vehicles were canceled as the Indian government insisted that the vehicles must be manufactured in India.

Over the past year, senior Tesla executives have met with Indian government officials at least three times. When Indian Prime Minister Narendra Modi visited the United States for an official visit in June this year, he met with Tesla CEO Elon Musk in New York to discuss the potential establishment of a plant in India.

(Photo credit: Pixabay)

According to Bloomberg’s report, Taiwanese company Wistron, previously one of Apple’s iPhone assembly suppliers in India, has agreed to sell its 100% stake in Wistron InfoComm Manufacturing (India) Private Ltd. to Tata Group for $125 million on October 27, 2023. Wistron will formally exit Apple’s supply chain, and Tata will become the first local iPhone assembly supplier in India.

TrendForce’s insights:

1. Apple Focuses on Indian Manufacturing as Wistron Exits iPhone Assembly Business

Amid international geopolitical risks, Apple has chosen to diversify its supply chain and production risks by shifting its iPhone assembly business from China to India. Apple’s decision to opt for India is primarily due to the fact that since 2015, India has become the fastest-growing regional market for smartphones globally.

Additionally, in recent years, the Indian government has actively worked to make India an attractive manufacturing and export hub for international companies. With strong government policy support and a vast domestic market, these factors have allured Apple to shift its production base here.

In the past, Wistron, along with Foxconn and Pegatron, was one of the three iPhone manufacturers for Apple in India. However, in 2020, there were reports of a riot at Wistron’s Indian factory, where thousands of Indian employees were dissatisfied with excessive working hours and unpaid wages. They vandalized the factory and even stole iPhones. This incident prompted Apple to initiate an investigation and ultimately led to a temporary suspension of its orders with Wistron.

Additionally, on July 17, 2020, Wistron announced the sale of its iPhone assembly plant located in Kunshan, China, to Luxshare Group. While this factory had an annual revenue that could exceed 100 billion yuan, its net profit margin was only 0.2%.

It can be inferred that the profit margins in the subcontracting business were inherently low, and following the riot incident at its Indian plant, Wistron may have lacked the bargaining leverage with Apple. Therefore, after considering all factors, it decided to sell its iPhone assembly plant in India.

2. Tata Group Takes Over India Manufacturing, But Expectations Are Low for a Significant Increase in Their Share of New iPhone Assembly

Currently, Wistron’s factory in Bengaluru is primarily responsible for assembling orders for the iPhone 14. To qualify for production subsidies from the Indian government, Wistron has committed to producing at least $1.8 billion (USD) worth of iPhones by March 2024.  After this transaction is completed, Tata Group will take over and fulfill this commitment.

Previously, Tata Group’s casing factory produced only one out of every two components that met Apple’s standards, indicating significant room for improvement in its yield rate. By examining the outsourcing production share table below, it is evident that Foxconn has the highest share in Apple’s current new iPhone assembly. Among these four models, only certain models like iPhone15 and iPhone15 plus are produced by Tata Group in India.

This suggests that Apple may be allocating the production of relatively less popular models to Tata Group for testing their yield rates. This decision may be due to the positioning of iPhone and Plus series products, coupled with their comparatively lower sales performance in recent generations. Apple is likely doing this until the production standards of the Indian outsourcing factory can be confirmed to meet 100% compliance.

Consequently, even though Tata Group’s acquisition of Wistron’s subcontracting factory is expected to expand its capacity, its share in new iPhone assembly is unlikely to significantly increase in the short term.

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• Tata Group to Become the Fourth iPhone Assembler as Production Relocation Accelerates

On August 3rd, India introduced a licensing regime for the import of laptops and tablets. However, it was swiftly postponed after facing criticism from the industry and the United States. The regime would have enabled the government to delay or reject import requests and required permits for each shipment.

In a recent development, the Indian government has decided to permit the unrestricted import of laptops and tablets and has initiated a new “authorization” system to monitor the shipment volumes of these devices without disrupting market supply.

Officials have announced that the new “Import Management System” will go into effect starting from November 1st, requiring companies to register their import quantities and values. This data will be used for monitoring purposes, although the government will not deny any import requests.

India’s Trade Secretary Sunil Barthwal announced during a press conference on Friday that there will be no restrictions placed on the import of laptops. He emphasized that the government’s intention is to closely monitor laptop importers rather than imposing restrictions.

This decision has come as a relief to global laptop manufacturers such as Dell, HP, Apple, Samsung, and Lenovo, who had been apprehensive since the announcement of the regime in August.

From April to August, India’s imports of electronic products and software, including laptops, tablets, and personal computers, amounted to $33.6 billion, marking an almost 8% growth compared to the previous year.

S. Krishnan, a senior official from the Ministry of Electronics and Information Technology, stated that the objective is to “ensure that we have all the data and information we need to have a fully credible digital system.”

The India Cellular and Electronics Association (ICEA) has expressed deep appreciation for the government’s recent decision to maintain unrestricted imports of laptops and tablets.

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• [News] Google Follows in Apple and Samsung’s Footsteps, Set to Manufacture Pixel 8 Series Phones in India

(Photo credit: Pixabay)

Google is set to follow the lead of industry giants like Apple and Samsung by manufacturing its Pixel 8 series smartphones in India, with plans to supply the market starting in 2024.

“Today we see an even greater opportunity to make Pixel smartphones available to more people in India, and are very excited to announce our plan to manufacture Pixel smartphones in India. We intend to start with the Pixel 8, and will partner with international and domestic manufacturers to produce Pixel smartphones locally. We expect these devices to start to roll out in 2024, joining India’s ‘Make in India’ initiative,” said Rick Osterloh, Senior Vice President of Devices and Services at Google, emphasizing the significant opportunity for Google in serving Indian consumers with Pixel phones.

However, Google has not disclosed specific production quantities or the proportion of Pixel phones that will be manufactured in India, nor have they revealed information about their manufacturing partners’ factory locations.

According to insiders, India’s largest contract manufacturing company, Dixon Technologies, and Foxconn’s Indian subsidiary are among the competitors in this effort to produce Pixel phones.

Under the policies promoted by Prime Minister Narendra Modi, India has attracted increased investments from Apple. This year, Apple has not only opened two Apple-owned stores in India but has also moved more of its iPhone production from China to India. The recently launched iPhone 15 is the first iPhone manufactured in India.

A majority of Samsung smartphones sold in India are produced at Samsung’s Noida facility, the largest smartphone manufacturing plant globally, which manufactures the Galaxy A and M series. With the introduction of the Galaxy S23 series earlier this year, Samsung has also confirmed that the Galaxy S23 series for the Indian market will be produced locally. In addition to Apple and Samsung, Chinese Android smartphone manufacturers have also established partnerships with local Indian manufacturers.

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• [Insights] Google Teams Up with HP to Produce Chromebooks in India

(Photo credit: Pixabay)