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Apple's wireless earbuds, commonly referred to as AirPods, are the fastest-selling product line at the company. These smart buds boast features like quick iPhone pairing and voice-activated "Hey Siri" commands that make them stand out from other wireless earbuds.
Apple's top-of-the-line AirPods Pro models feature up to twice as much active noise cancellation and improved charging cases. While less expensive AirPods 2 models don't offer as many features, they do have better battery life and come with a convenient case.
According to Reuters, Foxconn, the Taiwanese contract manufacturer that manufactures approximately 70% of iPhones, is investing $200 million in India to produce Apple's AirPods. This marks their first venture into manufacturing the wireless earphones.
According to a Reuters source, Foxconn plans to construct a new plant in Telangana, India to manufacture AirPods. This investment is significant as it will enable Foxconn to diversify their manufacturing base.
This move is also indicative of the company's gradual shift away from China, whose economy has become increasingly vulnerable due to trade tensions and a Coronavirus-related disruption at its largest factory last year.
As part of Apple's effort to diversify its manufacturing base, Apple has been asking suppliers to move production away from China. One such supplier is Jabil Inc, which has reportedly started producing AirPods enclosures or plastic bodies at their Indian facility.
According to an individual with direct knowledge of their plans, Foxconn Interconnect Technology Ltd plans to begin construction of a facility in Telangana this year and begin production by the end of 2024 at the latest.
India, widely considered as the world's largest emerging market, has welcomed these developments with open arms. Its government has given initial approval for 14 Chinese Apple suppliers to set up assembly plants there and Prime Minister Narendra Modi is considering offering financial incentives to companies who choose to locate production there.
However, it remains uncertain whether this plan will have an effect on current AirPods suppliers. Luxshare Precision Industry, which currently assembles the AirPods, did not respond to a Reuters request for comment.
Foxconn may have won this deal, but their work is far from over. Rumors indicate Apple may soon ask its suppliers to assemble more components in India.
It will be interesting to see how Apple and Foxconn respond to this news. It could have a major effect on their business, as they must build out substantial infrastructure in India and employ substantial personnel. Furthermore, this signals an important milestone in India's push to become one of the key players in global iPhone production chains.
Apple has recently invited Luxshare Precision Industry, a mainland Chinese company, into the exclusive club of global iPhone assemblers - signalling an important shift away from a decade-old production model just as Washington-Beijing tensions escalate. The deal will give Luxshare Precision Industry, which manufactures cables and antennae, the opportunity to become one of the iPhone's key component suppliers, sending its shares up as much as 7% on Monday.
Western technology brands have begun to diversify their supply chains outside China, but it remains challenging to completely diversify production. That is why some Western suppliers, including Foxconn, have started working with Chinese manufacturers.
But while domestic firms like Luxshare may benefit from this move, it also comes with greater risks, as Chinese workers are often implicated in human rights abuses or have been involved in China's ongoing economic battle with the United States.
Over the past decade, China has steadily built a world-class electronics industry - one that has allowed Chinese firms such as Luxshare to take over iPhone assembly lines from Taiwanese competitors Quanta Computer, Pegatron and Compal Electronics.
Though Chinese electronics companies have seen a meteoric rise, Apple continues to face an uphill battle due to their cheaper labor and easier access to markets. Chinese firms may struggle to meet Apple's stringent quality requirements due to lack of infrastructure.
Apple, like many of its major suppliers, is looking to move production away from China. This is particularly pertinent as the U.S.-China trade war intensifies and strict COVID restrictions like those which disrupted Foxconn's biggest iPhone factory last year continue to be enforced, leaving Apple more dependent on foreign partners for parts and assembly needs.
Furthermore, China's stringent COVID regulations and a series of unfortunate events at Foxconn's Zhengzhou factory last year significantly limited production capacity and hindered the company's capacity to meet customer demands.
Foxconn remains the leading contract manufacturer and assembly of Apple's iPhones, so they remain well-positioned to secure the AirPod order despite all obstacles.
Exclusive Apple supplier Foxconn has secured an order to manufacture Apple's new AirPods, marking their first foray into the wearable product market and diversifying production away from China. This move is part of their strategy to protect their business against potential trade tensions between the two countries.
Nikkei Asia reports that Apple is gearing up to release their iPhone 13 series, which is expected to see strong demand over the course of next year. According to reports, AirPods are expected to become a major source of revenue for Apple; as such, they have requested extra suppliers in anticipation of high demand.
Wistron Corp, a Taiwanese supplier, plans to begin producing internal components for the iPhone in India after opening an assembly line there. This would help them meet Indian Prime Minister Narendra Modi's "Make in India" policy, according to Reuters.
Apple is taking an important step toward building a strong presence in India, where they aim to boost production to 25% of their overall total from between 5% and 7% now.
One major reason is that India is becoming an increasingly attractive manufacturing hub for companies such as Apple, whose supply chain was disrupted last year due to China's COVID restrictions. The policy caused a shortage of popular devices like the iPhone and caused sales to slump.
However, Indian officials are pressuring suppliers to expand beyond just producing Apple phones. That is why one Taiwanese company has started expanding its facilities in India with more assembly lines, according to a senior company executive.
He noted that Apple also plans to expand its Sriperumbudur plant in Tamil Nadu to produce the iPhone XR and iPhone 11. This factory currently employs over 1,000 personnel, including foreign workers.
In addition to Foxconn and Wistron, India is home to Pegatron, which primarily manufactures the iPhone but also produces other Apple products. Recently, they started producing AirPods in India and plan to make MacBooks, iPads and other devices in the future as well.
Foxconn produces the majority of iPhone units annually, making it the world's largest contract manufacturer and an important source of Apple's revenue. Recently, however, it has been facing intense competition from Pegatron, located just across town.
Pegatron is a supplier of components for Apple products, such as the AirPods wireless headphones. Additionally, they manufacture motherboards, desktop PCs, notebooks, TVs and wireless systems.
Pegatron, like Foxconn, is seeking to grow their component business by increasing production capacity in Southeast Asia and Mexico. Company executives told reporters in Taipei that they plan on allocating $300 million to $350 million this year for expansion projects.
Apple's iPhone demand has decreased, placing additional pressure on suppliers to cut costs and boost efficiency. Some are even adding new partners or cutting prices in an effort to win orders.
Though some of these changes have been positive, much work remains to be done to improve working conditions in factories that manufacture iPhones. For instance, Pegatron, a Chinese iPhone assembler, recently reported that they are hiring workers to reduce overtime hours and improve conditions in their Shanghai facility.
According to a report, its Shanghai plant covers an area equivalent to 90 football fields and employs about 50,000 employees. However, some employees have complained that they are being required to work more than 80 hours per week.
To address these issues, Apple has increased its inspection of Chinese factories and begun inviting more outside experts. It also launched a program in China to educate its suppliers on labour law regulations and how to handle disputes.
Apple has promised to ensure the safety and wellbeing of its employees by requiring all suppliers to submit their policies, practices and procedures for review. Furthermore, it aims to enhance internal communication and transparency within its organization.
Foxconn remains Apple's dominant assembly business, accounting for around 60% of their revenue. The Taiwanese firm that also manufactures the iPhone has invested heavily in expanding its Indian unit and plans to begin production there by 2021 at the earliest.