mobile Technology

Foxconn wants to mass produce iPhone in India, can Apple copy the glory of the past?

According to Bloomberg News, Foxconn Chairman Guo Taiming said in mid-April that Foxconn will begin mass production of the iPhone in India this year.

“In the future, we will play a very important role in the smartphone industry in India. We have already moved our production line there.” Guo Taiming said openly.

If it comes true, the Chinese mobile phone market will undoubtedly change.

70% of the iPhones that Apple sells every year are processed by Foxconn. The shift of the focus of the Foxconn factory is also a shift in the focus of the Apple market.

In recent years, Apple’s road in the Chinese market can be described as twists and turns.

From the 2019Q1 financial report, Greater China’s revenue decreased by 27% year-on-year, and then all domestic iPhone sales channels simultaneously reduced prices to boost sales. At the spring new product launch, there was no hardware release, “from hard to soft”; The main foundry’s position to migrate, all kinds of actions seem to be transmitting a message: Apple hardware is difficult to mix in the domestic market.

Ten years ago (2009), iPhone3GS entered the Chinese market. At that time, the domestic mobile phone price was generally 144.63 -433.88 USD$, but the iPhone did not hesitate to locate the high-end market. The minimum configuration of the 8GB iPhone was priced at 722.98 USD, and the highest configuration of 32GB was priced at 1012.24 USD. The apple that arrived at the first time was full of confidence.

In 2010, Foxconn built a factory in Zhengzhou, making Zhengzhou the city of iPhone and the largest apple base in China.

In fact, China in 2009, just entering the 3G era, smart phones have just started, touch screen technology is also coming soon. At that time, WeChat was not yet been born. The main way of communication is to send text messages by phone. College students are addicted to the school (later Renren), and everything has just begun. Tianshidi and the people, Apple took advantage of the trend, easily captured the Chinese market, and was recognized and sought after by young Chinese.

It was glory to have a new iPhone at the time.

Whenever Apple launches a new product, fans from all over the country will queue up all night, hoping to get new products and experience new features in the first place. Sleeping tents outside the store is a common occurrence, and there is always a picture of the ox in every Apple store. When it is exaggerated, security guards are needed to maintain order.

In the past decade, Apple shipped more than 1.3 billion units . In 2015, it reached the peak of sales of Apple mobile phones, with shipments of 231.12 million units.

In order to meet Apple’s shipment demand, Zhengzhou Foxconn is also constantly increasing production capacity. According to incomplete statistics, in 2017, Foxconn had at least three factories in Zhengzhou, including 94 production lines, employing 350,000 workers. At that time, Zhengzhou Foxconn could assemble 350 Apple mobile phones per minute, with a daily output of 500,000. About 50% of the world’s iPhones came from the Foxconn factory in Zhengzhou.

Just as everyone thought that the iPhone would get better and better, the fate of Apple in the Chinese market in 2018 turned a corner. Apple’s 2019 Q1 earnings report showed that iPhone sales fell 15%, which directly caused Apple Q1 revenue to fall 4.5%.

As of Q1 2019, Foxconn is responsible for 70% of Apple’s mobile phone production. As the most important OEM company of Apple, Foxconn can’t be alone. Online rumors of Foxconn’s layoffs being cut by Apple were frequently confirmed, but they have not been officially confirmed.

According to Foxconn’s 2019Q1 financial report, revenue increased by 17.16% year-on-year. However, due to the impact of Apple’s sales, Foxconn’s actual profit declined. The specific data was not disclosed.

The myth that Apple created in China in ten years was finally terminated by domestic mobile phones.

This is mainly caused by the rise of domestic mobile phones and the saturation of the domestic and foreign mobile phone markets. Local mobile phone host manufacturers such as Huawei and OPPO have continuously improved their independent innovation capabilities and directly seized the iPhone market. iPhone sales continued to decline, profitability weakened, and shipments were not as good as domestic mobile phones.

According to IDC analysis, due to the downward trend of macroeconomic growth, the long-term replacement cycle of consumers, and the diversion of fragmented intelligent terminals, the Chinese smartphone market is saturated and the annual shipment growth slows down.

This analysis coincides with the research of China’s ICT Academy. According to the “Analysis report on the operation of the domestic mobile phone market in April 2019”, the domestic mobile phone market shipments rebounded in April 2019 after five consecutive months of decline. A year-on-year increase of 6.7%. However, from January to April 2019, it still fell by 6.7% year-on-year.

Not only has the Chinese smartphone market saturated, but the growth of the global smartphone market has also shown a downward trend.

According to the 2018 Q4 global smartphone market report released by IDC, a total of 376.5 million units were shipped in the quarter, down 4.9% year-on-year, and fell for the fifth consecutive quarter .

Ryan Reith, IDC’s vice president of tracking the global mobile device market, said, “The global smartphone market is now in a mess. Except for a few high-growth markets such as India, Indonesia, South Korea and Vietnam, we have not seen very (more) active in 2018. activity.”

Market factors have made Apple’s dominance unsustainable. The advantage of China’s demographic dividend is gradually weakening, aging is accelerating, and the increasing labor costs have forced Foxconn to leave the country.

According to the National Bureau of Statistics, the natural growth rate of China’s population has been declining year by year, especially in 2018, and there has been a significant downward trend.

According to the “Blue Book on Geriatric Health: China’s Geriatric Health Research Report (2018)” jointly published by the Chinese Academy of Social Sciences and other institutions, it is estimated that by 2020, the total number of elderly people in the country will exceed 250 million, accounting for nearly 20% of the total population.

Karn Chauhan, an analyst at Counterpoint Research, said: “For Foxconn, the iPhone is saturated in the Chinese market, and compared with India, the cost of workers in China is three times that of the former.”

Enterprise profitability must control costs, nothing wrong, but why is India?

From made in China to made in India

India is expected to become the next “world factory”?

In today’s complex economic environment, international public opinion often has the saying that “India has the power to replace China as the next ‘world factory’”.

In fact, as early as 2015, Foxconn founder Guo Taiming said that he plans to build 10 to 12 factories in India by 2020. It seems that the plan to launch an iPhone in India in 2019 is just a step-by-step plan.

For Foxconn, it is a normal expansion of the commercial landscape, but for Apple, the significance is far more than a strategic shift.

” Apple wants to shift its focus to India, which is a self-help that Apple can’t break through because of China’s dilemma. After moving to India, it can save a lot of labor costs (the average wage of Indian manufacturing workers is 1000-1500 yuan). It can also expand Apple’s influence in India. After all, India is the second largest consumer market in the world,” said economist Song Qinghui.

India is the world’s most populous country after China. The current aging population is about 80 million. It seems that the number of aging is large, but it only accounts for 6%.

This is also one of the main reasons why capital values ​​the Indian market.

In fact, Apple’s performance in the Indian smartphone market has not been very good. According to Bloomberg News, Indian consumers bought a total of 140 million smartphones last year, of which Apple’s smartphone sales were only 1.7 million.

On the one hand, due to the high price of Apple equipment, on the other hand, the penetration rate of the Indian smartphone market is extremely low.

Horizontally comparing the Chinese mobile phone market, the Indian mobile phone market has not yet been fully developed in terms of shipments and smartphone penetration.

The market potential is huge, labor costs are low, and India’s objective conditions are fully in line with the commercial expectations of capital.

In addition to its strategic significance, Foxconn’s mass production of the iPhone in India has certain political significance.

After Indian Prime Minister Narendra Modi came to power, he vigorously promoted the “Made in India” program, hoping to increase the proportion of manufacturing in India’s gross domestic product (GDP) from 15% to 25%, making India a competitive Global manufacturing center.

Guo Taiming once said that Foxconn plans to expand his visit to India and the Indian Prime Minister has invited him to visit India. In a few years, a Bangalore factory has been producing old iPhones, but after Foxconn made the latest decision, it will expand production to newer models.

There is also a speculation in the folks that India has raised tariffs on imported mobile phones several times in order to force Apple to set up factories in India and increase the manufacturing scale in India. If the guess is true, the Indian government’s investment approach can be described as a must.

The Indian government and Apple are like two hedgehogs who want to report to the group to warm up. They hug each other again and again.

Apple has no direct stores in India. Earlier, Apple has been looking for opportunities to allow the Indian government to allow itself to establish official retail stores, but according to Indian regulations, Apple wants to open a retail store in India to sell its own products, 30% of its parts must be purchased locally. . But as of now, most of Apple’s products are produced in China and cannot meet this condition.

Now, once Foxconn moves its Apple-related business to India, the problem may be solved. In addition, Apple is also expected to waive the 20% tariff, and the local mobile phone retail price will inevitably be lowered.

This seems to be a profitable business for Apple, consumers, the Indian government and even Foxconn.

“India’s own consumer market is very large, coupled with the scale effect of cheap labor, the assembly cost of the iPhone may be greatly reduced.” Song Qinghui said, “This is why many foundries and mobile phone manufacturers are eagerly awaiting this. The probability of successful transformation is still very large.”

But not everyone thinks so, the doubts about India becoming the next “world factory” are endless.

India does have similarities with China in terms of population, labor force, and market sufficiency. However, the “opposition” believes that this similarity is limited to the surface, and there are still large differences between the two countries at the market level.

Compared with China’s solid heavy industry foundation, India’s industrial base is relatively weak. Therefore, in the 1980s, India shifted its focus on industrial development to research and development of high-tech industries, and enabled the computer software industry to reach the world’s leading level.

There is also a more common saying that because India is located in the tropics, its people are much lazy than those in the temperate and cold regions, so Indians are more willing to engage in mental work. Surprisingly, however, the number of illiterate people in software powers is also the highest in the world.

The educational level of the Indian population is generally low. According to a report released by UNESCO in 2014, India is the country with the largest number of blind people in the world. The adult illiterate population is 287 million, accounting for 37% of the global illiterate population. In the past 20 years, China’s illiteracy has decreased by 130 million.

In addition, the UNESCO Global Education Monitoring Report 2013-2014 shows that 72% of the world’s illiterate population is concentrated in 10 countries, and the illiterate population of these countries is 557 million, of which India ranks first.

According to the data released by the government work report of 2018, the average age of education for the working-age population in China has increased to 10.5 years in the past five years.

In contrast, India’s young workforce may be able to win in quantity, but the quality is still unknown.

According to Foxconn’s 2017 financial report, it has 988,000 employees. Once Foxconn’s business moves to India, the number of employees at the Foxconn factory in India will increase rapidly.

Perhaps for Apple, mass production of the iPhone in India can be an urgent need, but for the foundry Foxconn, it still exists.

Foxconn is not willing to make wedding dresses for others

2000 Foxconn began to OEM for Apple. Since then, Foxconn has been closely tied with Apple to become a community of interests.

In the next few years, Apple was invincible in the world market, and Foxconn followed suit.

But in the second half of 2018, with the slowdown in Apple sales, Foxconn’s business began to get tough.

According to the Nikkei News, in November 2018, the source of informed sources said: “For Foxconn, initially prepared nearly 60 production lines to produce iPhone XR, but recently only about 45 production lines have been activated. Foxconn said that there is no need to produce so much now. The person also said that this means that Foxconn will produce about 100,000 iPhone XRs per day, which is 20% to 25% lower than the initial optimistic expectations.

According to Foxconn’s 2018 Q3 financial report, net profit of 24.88 billion Taiwan dollars (about 5.46 billion yuan) was lower than analysts’ expectations.

The quality of the host manufacturers can directly affect the profitability of the foundry, and even indirectly determine the life and death of the foundry.

This relationship between Hume and the Communist Party is like the sword of Damocles hanging over Foxconn’s head, reminding Foxconn: Although it is not to be eaten and worn, it will always be under the fence and has no initiative.

In 2018, the relevant person in charge of Foxconn said at the public meeting that Apple’s mobile phone business accounted for about 45% of Foxconn’s total business.

It can be seen that Apple’s business has propped up Foxconn’s half-day. Foxconn is very popular for processing apples, but it is not willing to be a “low-end factory” forever. Foxconn has been looking for opportunities to get rid of Apple’s strong dependence and seek a light transformation.

In 2018, Foxconn was listed in the name of “Industrial Fulian” . In the past, the world’s largest foundry was transformed into a technology enterprise. For Foxconn, which started from the labor force, it is not difficult to transform into a technology- and capital-intensive high-tech enterprise, but Foxconn seems to be ready.

According to the company’s data, only 2018 years ago, Foxconn has publicly invested more than ten times. According to conservative estimates, the accumulated investment exceeds 10 billion yuan. Its investment projects are mainly concentrated in AI and intelligent manufacturing. The trend of concentration and high-end.

Recently, Foxconn has received orders from Huawei P30, and has recruited 50,000 employees, but this news has not been confirmed by both companies.

If Foxconn’s customers outside of Apple can continue to scale up, even if Foxconn’s Apple product line is transferred to India, the domestic market impact will not be too great.

But achieving “de-applied” is not a one-off event.

In the short term, Apple’s contribution to Foxconn’s business is still no substitute. Taiwan Yuanda Securities Consulting Co., Ltd. reported that 70% of Apple’s iPhones sold by Foxconn are produced by Foxconn. In addition, Foxconn also undertakes OEM production of Apple iPad, Mac and other different products.

In addition to its serious dependence on Apple, Foxconn faces the simplification and high concentration of risks from customers and suppliers. According to Foxconn’s latest financial report, in 2018, the sum of the sales and purchases of the top five companies in cooperation with Foxconn accounted for 75.10% and 47.45% of the total, respectively. Putting the eggs in a basket, the risk can be imagined.

This shifting part of the focus to India is a strategic adjustment made by Foxconn and Apple based on the current situation in the international market, but this is not just the adjustment of the two companies themselves. Once the “iPhone is mass-produced in India” plan is launched. It will have a certain impact on the employment and structure of the relevant markets in the two countries, but the specific development trend has yet to be verified by the market.

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