It seems like the Tata Group has taken it upon themselves to make sure India becomes Apple’s new manufacturing powerhouse for iPhones.
Sources in the know have revealed that Tata Sons is seeking a whopping $1 billion in overseas loans in order to set up a globally scalable mobile phone and component manufacturing plant in Tamil Nadu that can make parts for iPhone devices.
This plan is supposedly a part of Tata Group’s Chairman N Chandrasekaran’s bid to attract the likes of Apple to India as many smartphone manufacturing giants are seeking for alternative production sites outside of China.
The sources said that the initiative will be headed by the Tata Sons’ wholly-owned subsidiary Tata Electronics which will begin with iPhone casings and eventually partner up with other OEMs aka original equipment manufacturers in South Korea and Japan.
Apple’s partnership with Tata Sons will be a part of the ‘Make in India’ push by PM Narendra Modi and thus it will be able to take advantage of the Indian Government’s production-linked incentive aka PLI scheme that was launched in August.
Tata Group-Apple Partnership: $1.5 Billion CapEx Plan
The sources who requested to remain anonymous mentioned that the Tata Group, via a combination of internal accruals and borrowings, is staring at a total capital expenditure of $1.5 billion for this project while seeking close to $750 million-$1 billion in ECB aka external commercial borrowings.
As of now, both Tata Group and Apple are keeping the details of this plan under an airtight lock. However, insiders have indicated that Tata Electronics is very eager to kick off the project as soon as it can and announce the partnership with Apple thus showcasing their capabilities.
Currently, apart from Samsung, Foxconn, Wistron and Pegatron which are three major contract manufacturing partners of Apple have signed up for the GOI’s $6.7 billion PLI scheme which is aimed at boosting smartphone production in the country over the next five years.
Overseas Loan Negotiations Underway
The sources who are aware of the developments have revealed that Tata Group is looking forward to putting together a 5-7 year funding latest by January and is hoping to start the project by Q3 2021.
The ECB negotiations are currently underway with several financial institutions and global banks.
According to a Tata Group Executive, the financing will primarily be received in foreign currency as a massive share of equipment will need to be imported.
The idea of this partnership was born during the pandemic when the Tata Group realised that there was a big enough gap in the demand-supply in precision engineering components in India along with several global markets which they could be tapped.
As many already know, Tata and Apple already have an existing relationship involving the retail chain Croma. It’s been a while since Apple has been assembling some iPhone models in India. Thus, manufacturing them here definitely seems the next logical step.
According to industry analysts, this particular move of Apple’s three key vendors highlights how the Cupertino-based tech giant is slowly diversifying their manufacturing bases in order to de-risk their production and supply chain.
Even though Apple has tried to lower their dependency on China for manufacturing, till fat Chinese locations assemble 90% of their units. Now, while the iPhone maker initially set its eyes on India five years ago, back then it failed to find a local vendor which could meet their strict environmental, health and safety standards.
Hopefully, with Tata Sons stepping up to the challenge in Q3 2021, Apple can finally set up an efficient manufacturing base in India.
Currently, neither the Tata Group nor Apple has responded to the queries about this grandiose plan in the making. We will keep you updated on all future developments. Until then, stay tuned.