Wistron, the first iPhone manufacturer in India, has made the decision to exit the iPhone manufacturing business in India, blaming Apple‘s stringent price negotiations strategy as the primary reason for their inability to generate profit.
This development coincides with Apple’s ongoing efforts to reduce its dependency on China alone, and shift a significant portion of its iPhone production to India. The need to reduce reliance on China as a manufacturing hub has been evident for some time, with the pandemic exacerbating the challenges faced at the largest iPhone assembly plant in the world. The disruptions caused by COVID-19 were estimated to cost the iPhone maker a staggering one billion dollars per week.
India has emerged as Apple’s primary alternative for production relocation outside China. Apple embarked on this transition gradually, initially awarding Wistron a contract to manufacture the original iPhone SE in the country. Subsequently, Foxconn and Pegatron established their own iPhone manufacturing facilities in India. By last year, even the latest flagship models were being produced in the country, which was known for its comparatively lower production cost.
A report from last year projected that considering the shift of iPhone production to India, a quarter of all iPhones could be manufactured in the country by 2025. The figure is estimated to go even higher to half of all iPhones by 2027.
What led Wistron to exit
Despite having first mover advantage, Wistron was off the track right from the beginning itself. Wistron’s struggles to generate profits from the iPhone contract may provide insight into the issues it faced regarding payment to its workers. In 2020, a major riot erupted at the company’s Bangalore plant due to wage discrepancies, resulting in millions of dollars in damages. Both the Indian government and Apple conducted investigations, which revealed serious labour law violations, including underpayment of workers, on Wistron’s part.
There were concerns at the time about the potential termination of Wistron’s iPhone contract. Ultimately, production was halted for three months, and Apple placed the supplier on probation.
While Wistron was the first company to assemble iPhones in India, it was significantly smaller than its two counterparts. This limits the impact of Wistron’s downfall on Apple’s expansion plans for iPhone production within the country.
Furthermore, it has been reported that iPhone production at the former Wistron plants will continue under new ownership. Luxshare acquired two of the plants, and has been granted a contract to manufacture flagship models from the outset. Additionally, the Tata Group is all set to complete the acquisition of the third Wistron iPhone plant and is currently preparing for iPhone 15 assembly.
However, challenges related to worker recruitment and supervision have been reported, as managers brought in from China struggled to understand and manage the distinct work culture. Recruiting local managers has proven difficult due to the plant’s location, approximately 25 miles from the city, resulting in a strenuous commute on poorly maintained and congested roads. Tata may encounter similar difficulties in addressing these issues.
The additional hurdles that may impede the new owners’ plans are the escalating salary levels and intensifying talent war in India. These factors could potentially jeopardize the overall execution of the revamped production strategy. Given Apple’s renowned reputation for enforcing strict delivery deadlines and engaging in tough negotiations with its contractors, it is plausible that meeting the production demands of iPhones at a lower cost could soon become a formidable task for the new owners as well.
Having considered these complexities, it remains intriguing to observe whether Apple can successfully scale up its iPhone production in India despite the functional challenges experienced at the factories previously owned by Wistron.
