In Short:
A fire at Tata Group’s iPhone component factory in southern India has halted production, threatening Apple’s ability to meet demand during the upcoming festive season. The plant is crucial for iPhone back panels and parts. Analysts estimate a 10-15% production drop, and while Apple has some stock, delays may lead to increased imports or new assembly lines in China.
Significant damage resulting from a fire at Tata Group‘s component plant for Apple iPhone in southern India poses a potential challenge to production in light of the anticipated surge in sales during the festive season, according to industry observers and informed sources. This situation may compel suppliers associated with the US firm to source critical components from China or other locations.
Impact on Production
The fire, which occurred over the weekend, has led to an indefinite halt in production at Tata’s Hosur plant located in Tamil Nadu. This facility is the sole Indian supplier of back panels for the iPhone and additional components, servicing Foxconn‘s assembly in the region as well as contributing to Apple’s own assembly lines at another site.
Sales Forecasts
According to Counterpoint Research, based in Hong Kong, local sales of the iPhone 14 and 15 models are projected to reach approximately 1.5 million units during India’s festive season, which spans late October to early November. The fire incident may hinder Apple from meeting as much as 15 percent of the anticipated demand.
Production Analysis
“A 10-15 percent decline in the production of older iPhone models from India is expected. However, Apple may mitigate this impact by importing additional components and redirecting more export inventories towards India,” stated Neil Shah, co-founder of Counterpoint, an organization that has consistently monitored Apple’s global shipments over the years.
Export and Economic Considerations
In addition to local sales, Tata, recognized as one of India’s largest conglomerates, exported iPhones valued at over $250 million (approximately Rs. 2,095 crore) to the Netherlands and the United States, along with other parts to China in the year ending August 31, as evidenced by commercially available customs data.
Current Stock and Future Actions
Tata has not provided any comments regarding the incident. Typically, Apple suppliers maintain a stock of three to four weeks’ worth of back panels. However, an industry source with direct knowledge indicated that Apple likely has an inventory for about eight weeks, thereby minimizing immediate effects.
Nonetheless, should the production halt persist, Apple might consider establishing an additional assembly line in China or increasing shifts at existing facilities to ensure a steady supply of parts for its Indian operations.
Broader Supply Chain Concerns
General disruptions in the supply chain have cast a shadow over Prime Minister Narendra Modi‘s initiative to attract foreign investment through the “Make in India” campaign, particularly in the electronics sector. Although Apple has been diversifying its operations outside of China, similar incidents involving fires at facilities operated by suppliers such as Foxlink and Pegatron have previously led to temporary halts in operations. Reports indicated that much of the fire safety equipment at the Foxlink facility was found to be non-functional, while Wistron and Foxconn have faced labor disputes in recent years.
Future Outlook
“These are temporary setbacks,” observed Prabhu Ram, vice president at Cybermedia Research. “Continuous improvements in safety standards and operational practices are essential for reinforcing India’s position as a growing global hub for electronics manufacturing.”
Tata is among Apple’s newest suppliers in India, with analysts estimating that the country will contribute 20-25% of total global iPhone shipments this year, a significant increase from the previous year’s 12-14%.
The fire-affected plant provided jobs for approximately 20,000 workers. Another facility within the same Tata complex was scheduled to commence the manufacture of complete iPhones later this year, though it remains uncertain whether this incident will delay those plans.
Tata also operates another iPhone plant near Bengaluru, which was acquired from Wistron last year, as well as a second facility near Chennai, which it plans to acquire from Pegatron.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
