The Indian factory started trial production of the iPhone 13. Is there any "foundry bonus" in China? Be wary of the two major advantages being weakened
India iphone 13 mainland
Recently, Apple announced a list of the world's 200 largest suppliers, these companies supply 98% of Apple's parts and manufacturing and assembly services. According to statistics, there are 48 companies in mainland China and Hong Kong, which are tied for the first time with Taiwan, Nanping Aluminum, Zhaoyi Innovation, Tianma Microelectronics, Jiangsu Jingyan, Suzhou Shengli Precision, Twelve companies including Run Electronics were selected for the first time.
Source: Apple
However, mainland companies in Apple's supply chain did not have much time to rejoice, because this is the 2020 list, and at the time when Apple announced the 2020 supplier list, the Indian factory officially announced the start of large-scale trial production of iPhone 13.
Apple's Indian factory is getting formal
Perhaps many people's impressions of Indian factories are only negative comments such as strikes, smashed factories, and disturbances. Indeed, at the end of 2020, Wistron’s iPhone in India was also smashed, resulting in the destruction of more than 20,000 iPhones, mainly iPhone SE and iPhone 7, and the direct economic loss is expected to exceed 60 million US dollars.
Since the industrial chain is not as complete as in mainland China, Apple initially only delivered some outdated, low-end models to Indian factories to reduce production costs. However, according to Indian media reports, because Wistron did not honor the wages of its employees, 2,000 people were eventually involved in smashing the factory, and more than 100 of them were arrested. The official reason given by Wistron was the chaos of local public security. After the accident, Wistron quickly found 5 local human resources agencies to supplement the labor force.
Foxconn's India factory also experienced a problem recently. As a result of a large-scale food poisoning incident, more than 400 production line employees were unwell and eventually triggered a large-scale strike. In order to resolve the dispute, Foxconn announced a five-day holiday, and after follow-up investigations, it will provide a solution that satisfies the employees.
Although negative events happen occasionally, Apple is still inclined to move the industrial chain to India, where labor costs are lower. Statistics as of April 2021 show that Apple has moved 8 production lines to India, including the iPhone 12 mobile phone production line. Apple officially stated at the time that Apple was proud to establish a factory in India and produce iPhone 12 phones for local users.
And now, according to Indian media reports, Apple is expected to carry out large-scale commercial production of iPhone 13 in India from February 2022 to meet India's domestic market and export needs. At present, the Foxconn plant near Chennai, India, has been trial production of iPhone 13 on a small scale.
Some industry analysts said that Apple's continuous production of the latest iPhone in India means that India has basically formed an iPhone foundry industry chain, and the foundation for the production of upstream and downstream parts has been formed.
There are also iPhone analysts who believe that India’s wages are lower, the labor force is more abundant, the market is larger, and there is no impact of sanctions, and the future imagination of the Indian market is huge. Therefore, Apple hopes to use India as another after Vietnam. Stronghold, and with the explosion of demand in the Indian market, India may rise to the first place in the iPhone industry chain in the future, similar to the current mainland China.
Another important reason for the electronics industry chain’s attention to India in the past two years is that the National Electronic Policy approved by the United Cabinet of India in 2019, compared with the 2012 version, the 2019 version of India’s National Electronic Policy is in the target And benefits are more attractive.
In this edition of India’s National Electronic Policy, India hopes to achieve an output value of 400 billion U.S. dollars in the value chain of electronic system design and manufacturing by 2025. By further increasing the added value of electronic product manufacturing, India will become a global leader in the electronics manufacturing service industry. By.
In addition, the previous investment of companies such as Xiaomi OV in India has laid a certain foundation in the mobile phone industry chain, including PCB motherboards, camera modules and other links in India to support a group of companies with relatively good quality, which is also the flagship iPhone. The pavement has been prepared for landing in India, otherwise the production cost will be significantly increased by re-importing these basic supporting facilities from mainland China and Taiwan and other places.
Indeed, in the course of this wave of momentum in the Indian mobile phone industry chain, Chinese domestic mobile phone brands have played a very leading role. According to the latest statistics from Counterpoint Research, in the third quarter of 2021, India’s smartphone shipments amounted to more than 52 million units, and 5G smartphones exceeded 10 million units for the first time, of which Chinese domestic brands contributed 74%. In the past few years, Huami OV has basically built factories in India, and has radiated a part of the ecological development of the industrial chain.
I just mentioned that the Indian smartphone market is more imaginative and an incremental market. According to the previous statistics of IDC, a world-renowned statistical agency, the total shipment of the mobile phone market in India in 2019 has reached 152.5 million units, making it the world's second largest smartphone market after the Chinese market. In 2020, although the Indian mobile phone market has also seen a slight decline of 2% due to the epidemic, the number of smartphone users in India has increased significantly. In 2020, it has reached 696 million, a year-on-year increase of 9.69%.
Speaking of Apple alone, another important reason why the company values the Indian market is that statistics on the Indian market in 2018 show that the iPhone accounted for only 1% of the Indian market. According to the statistics of the high-end flagship mobile phone market in the first half of 2020 released by the Indian market research agency CMR, Apple occupies 26% of the high-end market. Among them, the iPhone 11 series is the best-selling model with a price of 50000-100000 Indian rupees. Starting at RMB 4,200. Therefore, the Indian market is no longer a market that can only push entry-level models. Indian consumers have begun to widely accept high-end flagship phones, and the iPhone is the absolute king in this price range.
Once the trial production of the iPhone 13 in the Indian factory goes smoothly, it will be mass-produced in February next year, which will become another milestone in the development of Indian mobile phone foundry.
How many cards are left in the mainland market?
For the development of the global smart phone market in the past decade, the Chinese market has a detached position, and its leading role is obvious. It has gradually developed into the world's largest assembly and production center for the iPhone.
According to the data from Apple's official website, the number of jobs created by Apple in China has reached 5 million, of which the number of jobs created by supply chain, procurement and investment exceeds 3 million. We all know what the big data is? From major Apple foundries.
Source: Apple's official website in China
Regardless of India's future potential, Zhengzhou, Suzhou, and Shenzhen are currently the three cities supporting the Apple industry chain. Among them, the Zhengzhou Apple foundry is currently the largest iPhone foundry in the world. And why Zhengzhou became Foxconn’s new base camp back then? On the one hand, the Zhengzhou government worked hard from top to bottom, but Foxconn took a fancy to Henan’s large population, abundant labor resources, and low labor costs. With the cooperation of the Zhengzhou government, the iPhone from the Foxconn Zhengzhou factory can reach the Zhengzhou International Airport, which is only a few kilometers away, in a short time, and then be shipped to all parts of the world.
And now, India is working hard to supply these benefits from top to bottom. Although there is still a big gap in quality compared with the mainland, there will always be some difficulties when each incremental market starts to lay out. Especially for foundries such as Foxconn, Foxconn’s profit margin in 2020 is still less than 10%, and the company’s goal is to reach a 10% profit margin by 2025. However, as the labor costs in mainland China increase year by year, It is even more difficult for Foxconn to maintain profit margins. In 2020, under the influence of the epidemic and other comprehensive factors, Foxconn's net profit dropped by 12% year-on-year. In fact, revenue rose slightly, from NT$5.34 trillion to NT$5.36 trillion. Therefore, Foxconn also has the motivation to push the Indian factory forward and develop for the better. The situation of other foundries is similar.
So, can the mainland electronics industry chain just sit back and watch India grow bigger?
Excluding labor costs, the previous two obvious advantages of the mainland industrial chain are strong market demand and the concentration of the industrial chain. Looking at the previous point first, it is an indisputable fact that China's smart phones are becoming increasingly saturated at this stage, and consumers' demand for new phones is getting lower and lower. According to statistics from the China Academy of Information and Communications Technology, the cumulative shipments of the Chinese smartphone market in 2020 will be 296 million units, a year-on-year decrease of 20.4%. Compared with the peak data of 522 million units in 2016, the annual shipment volume of the Chinese smartphone market has fallen by half. Therefore, if the second child and the third child do not have obvious results, we need to use the advantages of the industrial chain to promote product upgrades, and awaken the stock demand with more epoch-making products.
The second major advantage is the concentration of the industrial chain. Judging from the list of suppliers announced by Apple in 2020, mainland China and Hong Kong accounted for the largest proportion. Together with the 48 manufacturers in Taiwan, China can account for nearly half of the proportion. In other countries and regions, there are 38 American companies, 33 Japanese companies, and 14 Korean companies. But is such an advantage in the industrial chain really leading the way? According to the dismantling of iPhone 12 parts by a Japanese survey company, the proportion of parts in mainland China is only 4.7%, which come from Luxshare Precision, Lens Technology, BYD, Pengding Holdings, Dongshan Precision, Lingyi Zhizhi, AAC Technologies and other leading companies, but the parts provided by these manufacturers are mostly cover glass, PCB, FPC precision structural parts and acoustic devices. Relatively speaking, the technical content is not high, and the high-end parts are basically from the United States, Japan and South Korea. In this regard, we need to vigorously research and develop more high-end products and try to avoid homogeneous competition in the low-end market.
Therefore, many advantages of the mainland smart phone foundry industry chain are already established, and the future growth is weak in the short term, and may even be retrogressive. For smart phone manufacturers that strive to achieve breakthroughs every year, the Indian market is in all aspects. They have already shown their fangs, and the mainland industry chain cannot lie on its merits and wait for India to make mistakes. Instead, it uses product innovation and demand escalation to tell new stories and create a brand-new trump card.
