From UPSC perspective, the following things are important :
Prelims level : NA
Mains level : India vs. China in smartphone manufacturing
- India’s smartphone manufacturing industry has reached a noteworthy milestone with the production and launch of the iPhone 15.
- This development raises the question of whether India is on the path to becoming a rival to China in smartphone manufacturing.
- While India has made substantial progress, certain factors still set it apart from China.
Why discuss this?
- India has become the second largest mobile-producing nation as locally made mobile phone shipments crossed the 2 billion cumulative mark in the 2014-2022 period, registering a 23% growth compounded annually, according to a new report.
- The ramp up in local manufacturing came on the back of huge internal demand, increasing digital literacy, and government push.
A Shift in iPhone Manufacturing
(1) Historical Context:
- iPhones have been assembled in India since 2017.
- Previously, India’s assembly lines lagged behind global launches.
(2) The iPhone Breakthrough:
- India’s Foxconn plant in Chennai produced the iPhone 15 a month before its global launch.
- This signifies India’s transition into a parallel manufacturing market alongside China.
Comparing India and China
(1) Not Yet Equals:
- India’s achievement is commendable, but it hasn’t completely caught up with China.
- Base iPhone 15 assembly takes place in India, while Pro iPhones are still produced elsewhere.
- Established supply chains in China pose a challenge for India.
(2) The Challenge of Supply Chains:
- Supply chain operations in India aren’t as seamless as in China.
- Bridging this gap is expected to take at least two more years.
Understanding Smartphone Manufacturing in India
(1) High-Level Assembly:
- Key components like cameras, displays, and chips are imported.
- India primarily serves as a high-level assembly destination.
- In contrast, China’s fabs (chip and display plants) provide a manufacturing advantage.
(2) Skill Development:
- Smartphone manufacturing has become highly automated.
- India’s workforce is being upskilled to operate sophisticated assembly lines.
- Supply chain considerations impact Apple’s decision to not assemble Pro iPhones in India.
Pricing Dynamics and Future Prospects
(1) Pricing Paradox:
- India isn’t inherently a cheaper manufacturing destination compared to China.
- Apple’s iPhone sales in India are growing, potentially by nearly 40%.
- Apple doesn’t need to lower prices due to continued growth.
(2) Potential Price Revisions:
- India experiences a pricing disparity compared to the US and UAE.
- Price revisions may become necessary once iPhone shipments exceed 10 million units annually.
(1) High-End Manufacturing:
- India aspires to host high-end smartphone and electronics manufacturing.
- However, this goal is distant due to the country’s limited volume in this segment.
- To make this transition viable, firms would need to export around 500 million units annually, a target that seems distant.
(2) Semiconductor Fabrication:
- Semiconductor fabrication, a critical aspect of electronics manufacturing, remains outside India’s grasp.
- Moving semiconductor fabrication to India isn’t currently feasible for companies due to the lack of scale and infrastructure.
- India’s ascent in smartphone manufacturing, exemplified by the production of the iPhone 15, is a significant achievement.
- While challenges remain, such as supply chain scale and workforce upskilling, India’s progress underscores its potential to compete with China in the future.
- As smartphone sales continue to surge, pricing dynamics and local manufacturing may undergo further transformations, benefiting both the industry and consumers.