Apple devices being shipped from China to India are being held up at Indian ports because of increased tensions between the two countries according to two sources cited by Reuters. Battles along the India-China border have resulted in the death of 20 Indian soldiers. A letter sent yesterday to India's commerce minister from the U.S.-India Strategic Partnership Forum (USISPF), a lobby group representing U.S. firms, says, "Authorities have abruptly halted the clearance of industry consignments coming in from China (and perhaps other destinations) at most major ports and airports." The letter, viewed by Reuters, goes on to say that holding up shipments from China could "send a chilling signal to foreign investors who look for predictability and transparency."
Skirmishes between India and China along the border prevent Apple and others from shipping devices to India
Apple's devices are designed in the U.S. but are mostly manufactured in China. Some iPhone models, however, are produced in India to avoid a $100 import tax on each unit shipped into India from China. And components shipped to India from Apple's leading contract manufacturer Foxconn, also have been held up by Indian authorities. Those components are used by Foxconn to help manufacture the Indian-built iPhones.
Besides Apple and Foxconn, other companies whose shipments are being held up at unnamed Indian ports include networking company Cisco, computer manufacturer Dell and automobile company Ford. Apple, Cisco, and Foxconn did not respond to requests for comments while Dell declined to give a statement; Ford said a shipment of auto parts was held up by Indian authorities seeking more information.
India is the second-largest smartphone market in the world after China. But as a developing market, the average income in India is low which is why value for money manufacturer Xiaomi does very well in the country. It also explains why it is so important for Apple to build some iPhones in India to save on the $100 import tax.
Last year when the U.S.-China trade war nearly led to tariffs being placed on iPhones imported into the U.S from China, Apple reportedly took a long look at moving some of its production out of China. While India was one market that was considered, there were questions about whether the country could support a supply chain that would produce components with the quality and quantity that Apple needs. Today's news doesn't present India in the best light as a risk-free area of production.
Most analysts believe that Vietnam could take some of Apple's production away from China. It all really depends on the future relationship between China and the U.S. and whether tariffs are eventually placed on iPhone units imported from China.
The first iPhone produced by Apple in India was the OG iPhone SE. That made plenty of sense because of the low price of the device. And it appears that the second-generation iPhone SE will also be manufactured in India. Apple has reportedly told one of its suppliers to send components to India that would allow Apple to have the iPhone SE (2020) manufactured in the country. Right now, the 64GB version of the device is priced in India at 42,500 rupees ($561.09 USD). Moving production to India would help Apple reduce the retail price of the handset in the country.
Apple also reportedly moved the assembly of three to four million units of its AirPods wireless Bluetooth earpods to Vietnam during the second quarter. The AirPods are Apple's fastest-growing product so Vietnam will need to be ready to handle this assignment. The accessory is also the top-selling ear-worn device on the planet; after selling 65 million units last year, Apple hopes to ring up 100 million AirPods in 2020.