AKIPRESS.COM - Apple is asking suppliers to move some AirPods and Beats headphone production to India for the first time, in a win for the South Asia nation as it attempts to rise in the global supply chain, Nikkei reported.

The move is part of Apple's gradual diversification from China, as it looks to lower the risk of supply chain disruptions stemming from the country's strict zero-COVID policy and tensions with the U.S.

Apple has been talking with a number of its suppliers about increasing production in India, including of key acoustics devices, as early as next year, three people familiar with the matter told Nikkei Asia.

In response, iPhone assembler Foxconn is preparing to make Beats headphones in India, and hopes to eventually produce AirPods there as well, two people with direct knowledge of the matter said.

Luxshare Precision Industry and its affiliates, which already produce AirPods in Vietnam and China, also plan to help Apple make the popular wireless earphones in India, sources said. However, Luxshare is focusing more on its Vietnamese AirPods operations for now and could be slower than its competitors in starting meaningful production of Apple products in India, one of the people said.

AirPods were one of the earliest Apple products to be mass produced outside of China, with production shifting to Vietnam in 2019 amid fallout from the U.S.-China trade war. More than 70 million units are shipped each year, second only to the iPhone among Apple products in terms of shipment volume. The majority of Beats production has also shifted to Vietnam since last year, sources told Nikkei Asia.

Bringing AirPods and Beats production to India would enlarge Apple's production footprint in the country, following a recent announcement that the latest iPhone is already being made there. Apple started having some older iPhone models made in India in 2017 by a smaller supplier, Wistron, but only accelerated such production last year.

While manufacturing in India was initially aimed at serving the massive local market, Apple is now developing the country as a strategic production base, with exports intended for markets such as Europe.

India, for its part, is already an important player in handset production, including smartphones and feature phones, with its global market share growing from around 9% in 2016 to 16% in 2021, according to Counterpoint Research. China's share declined from 74% in 2016, before the trade war and pandemic, to about 67% in 2021.

India plans to spend $30 billion to further strengthen its electronics supply chain, from semiconductors and materials to displays and electronics manufacturing, to attract more investment.

Apple Inc's iPhone exports from India crossed $1 billion in five months since April this year, Bloomberg News reported on Tuesday. The outbound shipments of India-made iPhones, mainly to Europe and the Middle East, are set to reach $2.5 billion in the 12 months through March 2023, almost double when compared to the year through March 2022, the report said.

Apple started making the iPhone 13 in India earlier this year, and the company announced last week its plans to manufacture the latest iPhone 14. The tech giant has been manufacturing iPhones in India from 2017.

The report comes as Apple seeks to shift some areas of iPhone production from China to other markets including India, the second biggest smartphone market in the world, where it is also planning to assemble iPad tablets.

Foxconn is Apple's most important supplier when it comes to expanding production in India. The world's biggest electronics contract manufacturer has operated in the country since 2015, and has key production campuses in the states of Andhra Pradesh and Tamil Nadu. Luxshare also aims to expand production in Tamil Nadu, while Pegatron, another assembler, has its iPhone production base in the same state.

Joey Yen, a tech analyst with IDC, told Nikkei Asia that India will emerge as a key alternative for electronics production outside China. It has young engineering talent and a big workforce, and a massive domestic market as a foundation," Yen said.

The Indian government's long-standing efforts to woo investment in the electronics manufacturing sector are finally bearing fruit, the analyst added. "China's continuing Covid-zero policies are also pushing tech companies to seek alternatives, and India in the long run could have an opportunity to grow," she said.