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Apple ( AAPL ) is ramping up its efforts in India.
The company opened its first retail outlet in Mumbai on Tuesday – with CEO Tim Cook himself inducted – as the company’s sales in the country are approaching $6 billion through March.
Similarly, the company is bringing 25% of iPhone production to India.
“We’ve done really well in India through COVID, and I’m now more bullish on the other side or, hopefully, the other side and that’s why we’re investing there,” Cook said. The company’s latest earnings call.
“We’re bringing retail there, we’re bringing the online store there, and we’re putting a lot of energy there. I’m very bullish on India.”
The simple explanation for Apple and Big Tech companies generally enjoying the Indian environment is the size of the market. This month, the United Nations announced that India’s population is expected to reach 1.43 billion by the end of this year, making it the world’s most populous country after China.
In many ways, India’s population represents an ideal market for Big Tech, and the Indian government is a willing partner, experts say.
“India has a large English-speaking and educated population,” said Darrell West, a senior fellow at the Brookings Institution. The country wants to develop its own manufacturing sector.
“One of India’s best assets is that it is not China,” he added.
‘A busy relationship’
Apple has been one of the world’s most visible advocates for China’s manufacturing sector.
However, the epidemic has changed China. And for Apple and the tech industry more broadly, India is booming.
According to Harvard Business School professor Willie Shih, there were two turning points.
The first was Shanghai’s mass covid lockdowns – which delayed iPhone shipments. These include the November protests over a contract dispute at the Foxconn factory in Zhengzhou, the “iPhone City”.
“For me it was Apple. [ultimate] Chinese manufacturer model champion. Apple seems to have lost confidence in China with Trump’s trade war, but what they’ve seen with the Covid-19 lockdowns has changed that, Shih told Yahoo Finance. Western companies look at that and say, “We don’t know what to do.” Now wait’ and that’s what led to this change in tone. This shows that if India gets its act together, it will grow.
“Our strained relationship with China is undermining our cooperation, and India is the world’s most populous country,” said Carnegie Mellon University professor Ari Lightman.
“Now the collaboration in India is like we saw in China with companies like Tencent increasing and now we are seeing companies like Flipkart increasing in India.”
Daniel Keum, a professor at Columbia University, added: “Apple needs a ‘new’ China to drive future growth. The Chinese market is now saturated, showing slow growth and complicated by political tensions.”
India’s ‘big challenge’
However, India has challenges in making the hype a reality. After all, we have seen the headline ‘India is the future of technology’ before. And in part, making it different this time comes down to infrastructure.
India, as a democracy, has a notoriously complex bureaucracy and still has a long way to go to get its industrial and financial infrastructure in order, Shih and West say.
“Infrastructure is a big challenge for India, it’s an area they need to invest in,” West said. “If they want to attract foreign capital, they have to make it easier to bring in and take out money. In India, this is not an automatic process.”
Shih agreed. “You try to build a railway in India, there’s going to be a backlash. Now if you try to build a railway in China, the government can make those people move,” Shih said.
“It’s about innovation and scale, but it’s also about serving a broad and diverse population,” Lightman added. We are talking about a huge ship with 1.4 billion people on board.
And for now, Apple is still pretty much stuck with Chinese manufacturing.
“Will Apple be more dependent on China for a while? Yes, but they will be more diversified,” Shih said. To that end, when it comes to manufacturing, Apple is exploring other Chinese options, with the company actively moving manufacturing operations to countries such as Vietnam, Malaysia and Thailand.
The reality is that any changes to Apple’s manufacturing footprint will be incremental, not incremental, and if Apple decides to pull out of China it will be a more difficult road.
“The most difficult thing is that Apple has spent years building its supply chain in China, and you can’t transfer it overnight,” West said. Even if you could, that would anger the Chinese government, so the transition period is very subtle.
Ali Garfinkle He is a senior tech reporter at Yahoo Finance. Follow her on Twitter @agarfinks And on LinkedIn.
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