The world’s biggest company is hedging its dependence on China

During an earnings call in early February where Apple announced it had more than 2 billion active devices worldwide, CEO Tim Cook dropped a few hints about where he thinks the next billion will come from. “I’m very bullish on India,” he said.

During an earnings call in early February where Apple announced it had more than 2 billion active devices worldwide, CEO Tim Cook dropped a few hints about where he thinks the next billion will come from. “I’m very bullish on India,” he said.

Apple is backing up Cook’s words with action—lots of it. The company is set to open its first Indian retail store in Mumbai next week, followed by a second in New Delhi. The stores have been preceded by factories, with Apple making more and newer iPhones in recent years through its Taiwanese contractors Foxconn, Wistron, and Pegatron. If Apple relied on China’s workshops through the first couple laps of the smartphone revolution, India is poised to take the baton in the relay.

Apple accounted for a quarter of all Indian-made smartphone sales by value last year, according to data from the tech analysis firm Counterpoint Research, more than doubling the company’s share of that pie from 2021. Apple produced iPhones worth $7 billion in India in the last fiscal year, Bloomberg reported, tripling its production in the country and pushing India’s share of global iPhone manufacturing to 7 percent.

It’s part of an effort by the world’s most valuable company to build some serious resilience into its sprawling global supply chain. Apple has spent the better part of a decade under Cook’s leadership milking China as both a manufacturing base and a key market, with the majority of its global devices made in the country. But China’s restrictive zero-COVID policies hit global supply chains hard, and Washington’s escalating push to decouple from China’s tech industry has companies scrambling to reduce their exposure. Companies are increasingly looking to diversify and future-proof their supply chains, according to Darrell West, a senior fellow at the Brookings Institution’s Center for Technology Innovation. Apple is a company with a market capitalization (around $2.6 trillion) bigger than some G-7 countries’ entire economies—what it does, and where it does it, matters to more than dongle geeks and shareholders.

“Apple is a bellwether,” West said.

India, with its abundance of engineering talent, relatively cheap labor, and one of the biggest markets in the world, presents many of the characteristics that made China such an attractive bet to Apple in the first place. The South Asian country may also provide a more stable geopolitical climate for Apple than China, thanks to New Delhi’s deepening partnership with Washington and its fundamentally democratic structure, despite India’s past fetish with protectionism, stringent labor laws, and the Indian government’s sometimes tense relationship with U.S. tech firms. Apple, which did not respond to requests for comment, reportedly lobbied successfully for some of those laws to be amended so it can ramp up Indian iPhone production.

Cook, the prime architect of the company’s shift to China years ago, hinted that it would follow a similar playbook in India. “India is a hugely exciting market for us and is a major focus,” he said during the February earnings call. “We are, in essence, taking what we learned in China years ago and how we scale to China and bringing that to bear.”

India has been a keen understudy. Prime Minister Narendra Modi’s signature “Make in India” program dialed up incentives in recent years for global tech firms to expand their Indian factories, committing more than $6 billion for smartphone manufacturers. India has also offered similar incentives for everything from automotive components to solar panels and, more recently, semiconductors, as it tries to muscle its way into becoming a prime thoroughfare for global supply chains.

“You need to have value chains come to India, come and produce in India—not just for India, but to export from India,” Indian Finance Minister Nirmala Sitharaman told an audience in Washington this week. “Mobile [phone] manufacturing is a classic example.”

And while Apple’s response to those incentives has been enthusiastic, the company still has to deal with the dragon in the room, as illustrated by Cook’s charm offensive in Beijing just weeks after the earnings call in which he touted India’s importance to Apple. At the state-sponsored China Development Forum in late March, Cook hailed Apple’s “symbiotic” relationship with the world’s second-largest economy and said he was “thrilled to be back in China.” Apple’s success in China stands in contrast to other U.S. tech firms—online platforms such as Google, Meta, and Twitter have long been blocked from the country’s restrictive internet, and even Microsoft, which has been entrenched in China for years, was forced to shut down its careers platform LinkedIn there in 2021.

Apple’s tightrope walk between the world’s two most populous countries (and biggest tech markets) will likely define not only its own future prospects, but also technology supply chains more broadly. The company’s deep dependence on China won’t be easy to shake off any time soon, no matter what Washington, Beijing, or New Delhi do. Decades of infrastructure, incentives, and the creation of a complete end-to-end supply chain in China that provides Apple with everything it needs—not to mention eye-popping revenues from Chinese sales—will not be easy or quick to replicate. More than 95 percent of iPhones are still manufactured in China, according to Kiranjeet Kaur, an analyst at tech research firm IDC, and Apple sold more than seven times as many iPhones in China last year as it did in India.