14 chinese suppliers to apple get nod to make in india via jv route

14 Chinese suppliers of Apple get approval to do in India via JV route, Telecom News and ET Telecom

14 Chinese suppliers of Apple get nod to do in India via JV route

New Delhi: The government has given preliminary permits to several Chinese Apple suppliers, allowing them to form joint ventures with Indian companies to set up facilities here, as it seeks to expand the local value chain in iPhone and electronics manufacturing.

Officials with knowledge of the matter said 14 companies from a list of 17 Chinese suppliers that had contacted the government had received preliminary approval. These companies, which include Luxshare, Sunny Optical, Han’s Laser Technology, YUTO Packaging Technology, Strong, Salcomp, and Boson, provide components for other smartphone and electronics brands as well.

Officials said the government has made it clear that these Chinese companies will not be allowed to set up wholly-owned entities in India and that they must form joint ventures with local companies. Final approvals to start manufacturing will be granted at a later stage, after the formation of the joint ventures.

Apple did not respond to an email seeking comment on the Indian government’s decision.

“Initial conversations with a local Kos”

“We want Indian champions to emerge in the supply chain and this will happen when major Chinese companies partner with local companies. Full due diligence will be done while giving approval so that India’s interest is not harmed,” a government official told ET.

The official said the main reason for the government’s decision was the realization that domestic added value must rise to achieve self-sufficiency in electronics manufacturing.

Without the participation of Chinese companies, it will be very difficult and time consuming to develop an ecosystem for the manufacture of Apple products in India. “The importance of expertise is essential, and China is the main link in the global electrical manufacturing ecosystem,” said a second official. China has been Apple’s mother factory, and if the success can be replicated here, then the suppliers have to come.

The local added value in iPhone manufacturing is currently around 18%, and with partners coming in, that percentage is likely to rise to 50%, an industry executive told ET.

For example, Luxshare Precision is one of the best contract manufacturers of the American company and makes Apple watches, AirPods and iPhones. Sunny Optical makes camera lenses for the iPhone. In May 2020, Luxshare signed a deal with the Tamil Nadu state government to acquire the closed Motorola handset manufacturing unit in the state with an investment of around ₹750 crore. The central government has not yet approved the proposal. ET reported in its October 28 edition that the government of Tamil Nadu was urging Cen-tre to expedite the approval.

An industry executive said Chinese suppliers are already looking for partners in India and are in preliminary talks with as many as 50 local firms, including companies such as Tata Group, Lava International and TI India. On Oct. 22, ET reported that Lava is in advanced talks for a joint venture with Shanghai-based Huaqin Technology, the world’s largest original design manufacturer of mobile phones and tablets.

In the past, the government has rejected proposals from several Chinese component suppliers, especially smartphone maker Vivo, which wanted to enter India with a 100% stake.

Apple currently assembles iPhones in India through three contractual Taiwanese companies: Foxconn, Wistron, and Pegatron. All three have approvals under the government’s production-related incentive scheme for smartphones.

Another industry executive said that Chinese suppliers entering India through joint ventures will also be eligible to participate in the upcoming component manufacturing PLI scheme.

“Developing the supply chain of the most valuable companies on the planet is challenging and deeply satisfying,” said Pankaj Mohendru, President, Confederation of Cellular Devices and Electronics of India.

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On Saturday, media reported that China, which remains Apple’s main supplier, may lose its mark as the leading iPhone manufacturer as Apple looks to India and Vietnam to boost its supply chain.

He said it is a challenge because major and emerging industrial countries are competing fiercely for this supply chain. “A more satisfactory outcome than this would be the development and integration of Indian companies into joint ventures in global value chains.”

India currently imports sub-assemblies such as memory chip, camera module, IC processor, LCD assembly, parts and chargers/adapters, which make up about 80% of the bill of materials, according to data provided by the Manufacturers Association of In-Moulding Technology.

Business is booming for Apple in India, which figures prominently in major smartphone plans to diversify its manufacturing dependence away from China.

India has actually been one of the consistent growth markets for Apple, with double-digit revenue increases reported in Apple’s latest filings. The US tech giant is expected to report record shipments in 2023, surpassing the record 6 million shipments likely in 2022.

More than $2.5 billion worth of iPhones were exported from India from April to December last year.