Why Apple should set up manufacturing facilities in India

 

Foxconn

Apple recently launched its latest iPhone. However, no sooner did the new phone hit the market, reports than emerged of the phone carrying manufacturing defects. These reports were soon followed by news of a massive strike at the Foxconn factory in China, though Foxconn has steadfastly denied it. 

iphone 5

These developments set me thinking if Apple had overplayed its China bet. I see two threats to Apple emanating from China. One, China’s political system is a closed and turbulent one. It is not only difficult to know what is going on in that country but also to control or manoeuvre the events in one’s favour as they unfold. Two, labour unrest at the Foxconn facility seems to be simmering, in view of the long history of controversy surrounding the factory and repeated speculations in the media about its mistreatment of workers.

Tim Cook

I am sure Tim Cook, who has been instrumental in Apple’s outsourcing strategy and is an expert at matters related to supply chain management, is watching these developments in China closely and with a bit of worry. What if a major unrest at Foxconn were to jeopardize Apple’s future launches? Will it take much time for competitors like Google or Samsung, who are just waiting round the corner for a misstep by Apple, to capitalise on a hit to Apple’s supply lines? Why shouldn’t Apple, whose bank account is overflowing with surplus cash, plan for such an exigency when the going is good (instead of waiting to do it out of compulsion later)?

IndiaChina

Here is where India enters into the picture! It is high time Apple sets up a manufacturing base in India. Just look at the advantages.

Labour Cost

  • Labour in India is cheap too. States like Karnataka, Gujarat, Tamil Nadu and Maharashtra offer a vibrant business environment.
  • India is already a proven export hub. Though India might be a smaller market for Apple products in itself, it offers good facilities for MNCs that wish to manufacture/assemble here and then export to rest of the world. Many technology, automobile and consumer durable companies have already set up manufacturing bases in India for exports.
  • Though Tim Cook thinks otherwise, India’s domestic market for Apple products is set to grow. Setting up a manufacturing base now will help Apple garner a larger market share here in the future.

This is not to say that all is hunky dory in India for businesses. The recent labour strike at the Suzuki factory in Gurgaon, that resulted in the death of an HR professional would have set many businesses thinking.  The Singur episode, where political activism forced Tata Motors to shift its new Nano factory is still fresh in the memory.

However,
such incidents have been far and few between. A careful choice of the location for its manufacturing facility will help Apple hedge against the risks it runs in its China factories.

What do you feel about Apple setting up manufacturing facilities in India? Why hasn’t Apple already done it? Do you see Apple’s China strategy as putting all eggs in one basket? Why/Why not? Do share your views!

References 

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About Aman Sharma

Management Professional.
This entry was posted in Apple, Business, China, Economy, India, Leadership, Technology and tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

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