India is starting to help Apple diversify its production away from China

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.

Apple opens two retail stores in India: Apple BKC in Mumbai on April 18th and Apple Saket in Delhi on April 20th

Gene Munster and Brian Baker for Deepwater Asset Managemnt:

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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    1. You know the answer. The data is out there. The USA cannot compete in the worldwide competition to make low-cost consumer goods. The USA (and Europe) increasingly compete on higher value professional grade or luxury/durable goods and services. Apple doesn’t make these things – it may charge premium prices and misuse the “Pro” name but all its products are consumer grade and limited life. Goeb’s repeated feet stamping and sky screaming isn’t going to change that.

      1) American workers demand among the high wages in the world.
      2) Foreign countries dangle huge tax incentives to attract investment from US corporations, which are by far the richest entities in the world.
      3) Foreign countries often have hideous labor, environmental, and corruption laws that enable US corporate executives to line their pockets faster while hiding the damage they do.
      4) Real American worker productivity has stagnated as the current generation of entitled brats demands cushy work.
      5) The xenophobes in the USA slammed the door after their families entered the nation; they have done everything possible to prevent new immigrants from becoming citizens, so today there is a lack of people in the USA willing to do low-skill, low-wage work. Lazy fatass American kids would prefer to play video games and rot their minds on social media than learn a usable skill or earn a dollar.
      6) Transportation costs are so low that no corporate executive bothers to consider the wasted fuel shipping parts back and forth across the world.
      7) The US consumer is more interested in cheap disposable junk than well-designed durable goods. Just look how the People of Walmart have allowed their lifestyle to become.
      8) Nobody is pressing US executives to do anything different. They all say, why bother putting a factory in the USA when demand in emerging Asian markets are growing dramatically faster for almost all goods? Both corrupt US political parties back this growing corporatism, and the misinformation is so prevalent that a large percentage of the US electorate actually thinks trickledown economics work. They don’t, feudalism never worked effectively, and hundreds of years of economic data proves it, but stupid people will vote against their own interests to proliferate their wayward beliefs that were marketed to them by the very oligarchs that pull the rug out from under the dwindling middle class year after year.

      1. One possible method of incentivizing manufacturing in the US is to place import tariffs on finished products making it more affordable for companies to manufacture those products in the US than bring them in from outside the US. This appears to be the policy India is taking.

  1. Things evolved in China that were never anticipated, that dangerously risked Apple’s continuous unimpeded supply of finished products.

    When we spend $billions investing in production capacity and supply chain infrastructure in a foreign country, while we may have the best of intentions, there are many unknowns that are out of our ability to control. We should not expect the trajectory of a foreign government to align perfectly with our own.

    When huge companies like Apple calculate the cost of manufacturing a product in a far away place, there are many factors other than the depressed wages of the foreign country to consider. Political decisions made by foreign countries simply cannot be controlled by us.

    India is a sovereign nation that has national priorities that differ greatly from our own. Deep consideration of these uncontrollable factors can change the equation; simplistically deciding on manufacturing in a foreign location can have dangerous economic consequences.

    For example, when Apple’s valuation recently, irrationally dropped 25 points, because of the malicious blabbing of certain vindictive Chinese politicians, Apple in effect lost many billions of dollars in value overnight! How much of that value of cheap Chinese labor was cancelled by China’s irrational decisions?

  2. Lots of fancy words here above. Bottom line: the predatory communists running China, have stolen, and will continue to steal, intellectual property from the naive foreign (to them) corporations that foolishly think that fair play and “one good deed begets another good deed in return.” They lie, they con companies into setting up factories in China whilst the CCP owns 51% and can shut down the foreign operations on a whim (a new fake law) and begin their own copycat factories. My nephew in law from China told me a decade ago: “There is no such thing as an honest businessman in China.” And he oughta’ know.

  3. Apple’s endless pursuit of the chimerical factory, where the labor force is abundant, and nearly free, the workers are always happy and satisfied, and willing to perfectly follow any regimen, and the rulers are invariably benevolent.

  4. MDN: “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.”

    Nixon got it over time with eyes and mind open — bean counter Cook needs to get it, completely!

    Open question to Tim Cook: Please explain WHY you are not bringing back manufacturing for a 100% American born company back to America?…

    1. Breaking news: Goeb gives corrupt Crook Nixon a free pass.

      Like other myopic whiners, he refuses to mention the other 499 CEOs of the Fortune 500. He makes not a peep about Musk’s massive Shanghai factory or the Orange Dotard’s special relationship with Xi to support his daughter’s fashion company. No, all Goeb can do is whine about Tim Apple, moreso than his orange hero ever did. Then after 4 years of tweeting without any lasting economic results to show for it, the current administration came in and coordinated an economic stimulus bill that invested in infrastructure and small businesses, exactly the opposite of the trickle down oligarch tax break Orange Dotard signed. What does Goeb say about this? Well you know, he is always cheerleading the red team.

      1. Breaking News: @Samuel is putting words in my mouth regarding Nixon, full throttle Leftist deflection and typical personal attacks. Bottom Line: Samuel is INCAPABLE of staying on topic answering my post, got it…

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