Deepwater Asset Management’s Gene Munster and Brian Baker estimate that 40-45% of Apple’s overall revenue is manufactured in China and they expect that figure to decline to 25-30% in five years. They believe half of that decline will be the direct result of production moving to India.
From the demand perspective, India is one of the important parts of Apple’s growth story for the balance of the decade. On the June earnings call, Cook commented that India hit a June quarter revenue record and grew “strong double digits” and the company opened two new stores that [Apple CEO Tim] Cook commented are “beating expectations.” Apple is early in the process of building out channels and putting investment in direct-to-consumer. It’s the largest market in the world, and Cook says they have a “very very modest market share and it’s a huge opportunity.”
This begs the question, how much can India move the needle for Apple? The company does not break out sales for the country, and we estimate that India is about 3% of revenue today or ~$12B in sales growing at 20-25% y/y. Long-term we believe India should surpass Greater China, which will account for about 20% of sales this year or just under $80B…
[T]oday we estimate that 2% of Apple’s overall revenue is made in India, compared to our estimate that 40-45% of revenue is made in China. As a reminder, about 20% of Apple’s revenue is Services which doesn’t fall under any country.
We believe by the year 2027, 25-30% of Apple’s overall revenue will be made in China, down from 40-45% today. Of that 15% decline, we estimate half will move into India. In other words, India is central to Apple navigating China’s geopolitical production risk.
MacDailyNews Take: The less dependence Apple has on China, the better.
• The time to accelerate plans to move production out of China was November 9th 2016, but, hey, six years late is better than never! – MacDailyNews, December 4, 2022
• Diversify, diversify, diversify – especially away from CCP-controlled China. – MacDailyNews, October 19, 2022
• Apple cannot divest their dependence on China quickly enough (because they started years too late). – MacDailyNews. August 17, 2022
Former U.S. President Richard Nixon, who opened relations with China in the early 1970’s, just before his death in 1994 remarked on China: We may have created a Frankenstein.
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