Apple said it is facing the possibility of relying on China after the Tata factory fire
Extensive damage from a fire at Tata Group’s Apple iPhone components factory in southern India could hamper production ahead of a holiday sales boom, an industry observer and a source said, forcing the US company’s suppliers to arrange crucial parts from China or elsewhere.
The weekend’s fire has led to an indefinite halt to production at Tata’s Hosur plant in Tamil Nadu, the sole Indian supplier of iPhone back panels and some other parts for both contract manufacturer Foxconn in the country and its own iPhone assembly in another factory.
Hong Kong-based Counterpoint Research told Reuters it estimates local sales of 1.5 million iPhone 14 and 15 models during the Indian festive season, which runs from late October to early November, with Apple struggling to meet as many as 15 percent of that demand due to the fire.
“There will be a 10 to 15 percent impact on production of older iPhone models from India. Apple could offset that impact by importing more components and shifting more export inventory to India,” said Neil Shah, co-founder of Counterpoint , which has been tracking Apple’s global deliveries for years.
In addition to local sales, Tata, one of India’s largest conglomerates, also exported iPhones to the Netherlands and the United States in the year to August 31, as well as some components to China, worth a total of more than $250 million (about Rs. 2,095 crore). This is evident from commercially available customs data.
Tata declined to comment.
Apple suppliers typically have a three- to four-week supply of back panels, Counterpoint said. However, an industry source with direct knowledge of the matter estimated that Apple would likely have eight weeks of stock and therefore would not see an immediate impact.
However, they added that if the production suspension continues, the US company could set up a new assembly line in China or set up shifts there to secure parts for Indian iPhone makers.
Supply chain disruptions more broadly have cast a shadow on Prime Minister Narendra Modi’s push to attract foreign investors to ‘Make in India’, especially in the electronics sector.
Apple has diversified outside China, but last year separate fire incidents in India caused suppliers Foxlink and Pegatron to briefly suspend operations, with authorities discovering that much of the fire safety equipment at Foxlink’s facility was not functioning. Contractors Wistron and Foxconn have also been hit by labor unrest in recent years.
“These are temporary setbacks,” said Prabhu Ram, vice president at Cybermedia Research. “Continued efforts to improve safety and operational standards are crucial to strengthening India’s position as an emerging global electronics manufacturing hub.”
Tata is one of Apple’s newest suppliers in India, which analysts expect will account for 20 to 25 percent of total global iPhone shipments this year, up from 12 to 14 percent last year.
The fire-affected factory employed 20,000 workers. Another unit in the same Tata complex is expected to start making complete iPhones later this year and it is unclear whether this incident will lead to a delay.
Tata has another iPhone factory near Bengaluru, which it acquired from Wistron last year, and a second one in Tamil Nadu, near Chennai, which it will acquire from Pegatron.
© Thomson Reuters 2024
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