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Will India be the new China for Apple’s supply chain operations?

The world’s most valuable company spent over a decade building its highly sophisticated supply chain empire in China. But with US-China geopolitical tensions, its biggest strength has now turned into its greatest vulnerability. Will Apple be able to dismantle its China network and start over in India?

- The tech giant wants to dismantle its China supply chain network over investor pressure and geopolitical concerns, an FT report discovers.

- About 14 of Apple’s Chinese suppliers have gained approval to expand operations to India.

- Three key Apple suppliers, Foxconn Technology, Pegatron and Wistron, committed to producing up to 20% of iPhone volume in India by end-March 2026, according to Bloomberg.

- Apple’s share price is up 16.12% YTD.

Untangling its China supply chain web

Since the launch of the iPhone in 2007, Apple Inc. [AAPL] has climbed to the top of the smartphone industry and maintained its stronghold for years, revolutionising consumer tech and driving out the likes of Nokia [NOKIA].

Not only did it re-imagine the smartphone’s design and capabilities with the introduction of multitouch full-screen features, but it also built a highly sophisticated supply chain network in China, investing billions into high-tech custom production equipment in the country over the years and developing niche competencies to stay above its rivals.

In doing so, it has essentially embedded its production capabilities into the country, having sent its top product designers and manufacturing design engineers to its Chinese suppliers’ facilities. “All the tech competence China has now is not the product of Chinese tech leadership drawing in Apple,” supply chain researcher Kevin O’Marah said. “It’s the product of Apple going in there and building the tech competence.”

Now Apple is realising how deep the web runs – more than 95% of its top-selling products are manufactured in China, accounting for about a fifth of its revenue last year. As a US-headquartered company, it is facing intense pressure from investors and US politicians to cut back its involvement in China over geopolitical concerns, as US-China tensions continue to worsen. Instead, it is being pushed to scale up its diversification strategy which has some of its product assembly in India and Vietnam.

However, according to an FT report that interviewed 25 supply chain experts and Apple insiders, the tech giant does not seem to have a viable solution to the China entanglement, especially in the short term. A former Apple veteran knew who to blame for the “mess”. “Supply chain all goes back to one guy: Tim Cook.”

Apple is taking its Chinese suppliers to India

As part of the move towards shifting operations out of China, India is the first on Apple’s list of alternative supply chain destinations. Piyush Goyal, the country’s trade and industry minister, said on Monday that the tech giant plans to scale up operations, and that they already currently export about 5-7% of their manufacturing from India. “If I am not mistaken, they are targeting to go up to 25% of their manufacturing,” he said. The country exported more than $2.5bn worth of iPhones from the country between April and December 2022, almost double the total from the previous fiscal year.

Apple is taking more than a dozen Chinese suppliers with it in efforts to reassemble its network outside China. Three key Taiwanese suppliers, Foxconn Technology Group [2354.TW], Pegatron Corp. [4938.TW] and Wistron Corp. [3231.TW] applied for and received the green signal to ramp up production and exports of smartphones in India. The companies said they planned to produce up to 20% of iPhone volume in India by end-March 2026, Bloomberg reported.

Among others gaining approval are AirPods and iPhone assembler Luxshare Precision Industry Co. [002475.SZ] and a unit of lensmaker Sunny Optical Technology Group Co. [2382.HK], unnamed sources familiar with the matter told Bloomberg.

The Apple expansion to India aligns with Prime Minister Narendra Modi’s national priority to grow the country’s manufacturing sector through economic incentives and state support.

Funds in Focus: iShares Expanded Tech Sector ETF

Apple’s share price is up 16.66% year-to-date, and it is reporting its Q1 earnings on 2 February.

Apple is the second largest holding in the iShares Expanded Tech Sector ETF [IGM], with an 8.08% weighting. The fund offers exposure to a range of tech giants, including an 8.42% holding of Amazon.com Inc. [AMZN] and a 7.9% weighting of Microsoft Corp. [MSFT]. The ETF was up 12.74% in the last month but down 16.48% year-over-year.

The iShares U.S. Tech Independence Focused ETF [IETC] provides exposure to companies that could benefit from more resilient value chains. The fund, which includes a 1.89% holding of Apple, is up 6.22% year-to-date.

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