MUMBAI -- Apple's Taiwanese contract manufacturer Foxconn has begun assembling the iPhone 11 series at its Chennai plant in southern India, part of a bid by the U.S. tech giant to diversify production beyond China.
The iPhone 11 models assembled in India have just hit retail stores in the South Asian country starting around 63,800 rupees ($850). Analysts expect Apple will eventually lower prices closer to the level at which most Indians buy.
As the prolonged trade war between the U.S. and China intensifies, Apple needs to spread out its iPhone supply chain, which has been heavily concentrated in China. The iPhone 11 was first launched in September 2019.
"The India-assembled iPhone 11 is also being considered for export, in line with the already existing mobile phone models," a source familiar with the matter source told the Nikkei Asian Review on condition of anonymity.
The Foxconn unit in Chennai assembles the iPhone 11 and iPhone XR, while the iPhone 7 is assembled in Bangalore by Wistron, Apple's other key supplier, the source said.
Details on production volumes or exports for the iPhone 11 are not known. Apple's local unit did not respond to a request for comment.
Counterpoint Research estimated that 29% of Apple's smartphone shipments in the first quarter of 2020 in India came from domestic manufacturing facilities, while the number came down to 17% in the second quarter. Apple exported around 400,000 iPhones in the first quarter, mostly to European countries, the research company said.
On the domestic sales front, Apple has been trying to crack the Indian market in the last couple of years, lured by rising disposable income there. Making phones in India saves it import duties of 20%, which effectively increases its competitiveness in a market dominated by South Korean rival Samsung Electronics and Chinese smartphone brands OnePlus, Xiaomi, Oppo and Vivo.
Prachir Singh, a senior research analyst at Counterpoint Research, believes that assembling the iPhone 11 in India is part of Apple's plan to shift 20% of production volumes to India.
This plan was helped by the "[Indian] government's production-linked scheme," said Prachir. "In the long-run, India is a lucrative market for any price segment, because of its growing millennial population and rising income. Currently, 10,000 to 15,000 rupees is the sweet spot [for a smartphone] but the average selling price has been increasing over the years," he added.
Apple began assembling older iPhones in India at Wistron's local unit in 2017. Its manufacturing facilities in India currently include Foxconn's Chennai plant and Wistron's two sites in Bangalore. Singapore's Flex and Finland's Salcomp provide chargers for the handsets.
Apple discontinued local assembly of the iPhone SE and iPhone 6s in 2019.
In March, the government of Indian Prime Minister Narendra Modi announced it would extend a 4% to 6% incentive on the incremental sale of goods made in India by big electronics manufacturers for five years. The incentive is meant to boost domestic manufacturing and attract large investments in mobile phones and certain electronic components.
New Delhi is keen on supporting Apple and other global manufacturers to use India not just as a manufacturing hub but also as an export center. It has been reaching out to global companies that are looking to shift their bases from China.