India vs. China in Smartphone Production

  • With the creation and release of the iPhone 15, India’s smartphone manufacturing industry has attained a significant milestone.
  • This achievement begs the question of whether India is on track to compete with China in the smartphone manufacturing market.
  • While India has achieved significant progress, many elements still distinguish it from China.

Why are we debating this?

  • According to a new estimate, India has surpassed the 2 billion cumulative milestone in locally manufactured mobile phone shipments from 2014 to 2022, marking a 23% compounded annual growth rate.
  • The increase in local manufacturing was spurred by high internal demand, rising digital literacy, and government support.

A Shift in iPhone Production

(1) Historical Context:

  • Since 2017, iPhones have been built in India.
  • Previously, India’s production lines trailed worldwide releases.

(2) The iPhone Breakthrough:

  • The iPhone 15 was manufactured in Chennai, India, by Foxconn a month before its global release.
  • This marks India’s entry into a parallel manufacturing market with China.

Comparing India and China

(1) Not Yet Equals:

  • India’s progress is admirable, but it has not yet caught up with China.
  • The base iPhone 15 is assembled in India, whereas Pro iPhones are still manufactured overseas.
  • China’s well-established supply lines pose a challenge to India.

(2) The Challenge of Supply Chains:

  • India’s supply chain operations are not as smooth as those in China.
  • It is predicted that closing this gap will take at least two years.

Understanding Indian Smartphone Manufacturing

(1) High-Level Assembly:

  • Imported key components include cameras, screens, and chips.
  • India is primarily a high-level meeting destination.
  • China’s fabs (chip and display facilities) on the other hand, provide a manufacturing advantage.

(2) Skill Development:

  • Smartphone production is now extremely automated.
  • The workforce in India is being trained to operate complex assembly lines.
  • Apple’s decision to not produce Pro iPhones in India is influenced by supply chain concerns.

Pricing Dynamics and Future Prospects

(1) Pricing Paradox:

  • In comparison to China, India is not naturally a cheaper manufacturing site.
  • Apple’s iPhone sales in India are increasing by over 40%.
  • Because of its continuous expansion, Apple does not need to cut its prices.

(2) Potential Price Revisions:

  • India has a pricing disparity with the United States and the United Arab Emirates.
  • Price increases may be required once iPhone shipments hit 10 million devices per year.

India’s lacunae

(1) High-End Manufacturing:

  • India intends to be a hub for high-end smartphone and electronics production.
  • However, given to the country’s minimal volume in this category, this goal is a long way off.
  • Firms would need to export roughly 500 million units each year to make this transformation viable, which appears to be a long-term goal.

(2) Semiconductor Fabrication:

  • Semiconductor fabrication, a vital component of electronics production, is still out of reach for India.
  • Companies are currently unable to relocate semiconductor fabrication to India due to a lack of scale and infrastructure.

@the end

  • The fabrication of the iPhone 15 by India is a noteworthy breakthrough in smartphone manufacturing.
  • While problems like as supply chain scale and worker upskilling remain, India’s success demonstrates the country’s ability to compete with China in the future.
  • As smartphone sales continue to rise, pricing dynamics and local production may experience additional changes that benefit both the industry and consumers.
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