By Chand Bellur
July 25, 2020 at 4:41 p.m. PT
- Manufacturing in only one nation can create problems if political instability, resource issues, or health crises arise.
- Apple and manufacturing partner Foxconn are currently expanding across the globe to improve supply chain diversification.
- Manufacturing in India allows overseas corporations to sell products there without a 20% import duty.
Apple and Foxconn Manufacturing iPhone in Chennai, India
Apple is a multinational corporation. Incorporated in Deleware for tax purposes, the company has its headquarters in Cupertino, California, to take advantage of highly skilled tech workers. Then there’s all of the international subsidiaries — three in Ireland and many in other nations.
Multinational corporations have several advantages. They can manufacture products in nations with inexpensive labor. Hiding profits in offshore tax shelters is another way to grow profits and revenues every quarter.
If sales are off, merely repatriating profits from a tax shelter can improve quarterly results. Some may say it’s a rigged system, but it’s the outcome of anarchy. Despite treaties and trade deals, the international arena is anarchic, with many opportunities to exploit.
Apple’s first foray into Indian manufacturing began with the iPhone 7. The inexpensive and outdated device is a good fit for the Indian market. From there, Apple started manufacturing the iPhone XR and now the iPhone 11.
Assembled in India, these new iPhone models use parts from all over the world. While this gives Apple an economies of scale advantage, it could also produce kinks in the supply chain.
What’s Made in India Stays in India
By assembling products in India, Apple avoids a 20% import tariff. Indian-made iPhones are intended for the domestic market. For now, it’s unlikely that an American or European customer will purchase a device assembled in India.
As Apple tries to expand manufacturing across the globe, this may change. Some AirPods components, such as the charging case, are assembled in Vietnam. American consumers can buy these items, with the nation of origin marked on the product.
Apple manufacturing partner Foxconn plays a vital role in expanding global manufacturing. The company operates Apple’s manufacturing facilities in Vietnam, China, and India; however, they have factories throughout the world. Factories in Brazil, Mexico, Europe, and other nations serve other tech companies.
Overall, Apple and Foxconn’s move into India makes sense. With more manufacturing bandwidth and fewer tariffs, Apple and Foxconn seem to have a bright future in the international technology market.