It wasn't so long ago that critics derided Apple CEO Tim Cook for his ambition to build business in India, but now it all makes complete sense.

India has a lot to offer Apple and tech

India has and always did have a lot to offer Apple: a young population, education, a growing middle class and consumer market, and relatively low employment costs. Apple has also worked extremely hard with India's governments to navigate that nation's desire to protect its own economy while opening to manufacturing.

There's a lot to unpack in that sentence, but in essence this seems to be why local manufacturers such as Tata are working with Apple's important Taiwan-based production partners on new factories to support the Apple supply chain. Doing so creates a balance that lets local enterprises benefit as the multinationals move in.

It also seems to help encourage consumers to purchase the products. After all, it must surely reflect the huge amount of work Apple has done to reach consumers in India that it led India's premium smartphone market last year, according to Counterpoint.

It means one in every 20 smartphones purchased in India last year was an iPhone. It also explains why Tata in December announced plans to open 100 Apple stores in India.

High demand, low saturation

To put a little context around this business, India is currently the world's second-biggest smartphone market, bigger than the US, but characterized by significantly lower smartphone penetration (roughly 45%).

In other words, there is space to grow business there. In the US, 73% of us have smartphones while in the world's biggest market, China, 63% do.

As we've previously reported, Apple is engaged in redesigning its manufacturing and supply chains to become more resilient to future shocks. Such shocks include the impact of war and disease, of course, but also extend to political uncertainty such as that around US/China relations.

India will assemble 50% of iPhones by 2027

Apple must protect its manufacturing base and is deeply involved in doing so, partly in response to the pandemic. Most recently, Digitimes revealed that India is expected to assemble up to half of all Apple's iPhones by 2027, up from just under 5% now.

"The speed of supply chain migration to India will be accelerated in the future because of the need to diversify risks in light of uncertainties in China's pandemic control," said Digitimes analyst Luke Lin.

He also expects Vietnam to benefit as Apple production moves outside of China.

The forecast follows a JP Morgan prediction claiming India will manufacture 25% of iPhones sold worldwide by 2025.

These data points, from 5% today to 25% in two years' time and 50% in four, gives some sense of the momentum behind this production shift.

The pace of change is driving critical investment.

Apple's key partner, Foxconn, is spending hundreds of millions of dollars to promote business in India. iPhone manufacturing has already created 150,000 jobs in India, according to reports, 50,000 of these in manufacturing. Pegatron, Wistron and component makers Avary, Foxlink, Salcomp and others are already in situ.

Of course, all this manufacturing will require massive investment in energy supply. Tata has its own solar energy production plants in the southern Indian state of Tamil Nadu and it once again seems inevitable Apple will seek to invest in climate-friendly energy for use across its India-based supply chain.

Apple reflects a trend

But this isn't just about Apple. The company is simply the most discussed brand.

Samsung Electronics is also shifting Android production out of China, once again into India and Vietnam. Others, possibly including your own company's partners, will do the same. Digitimes tells us smartphone brands other than Apple and Samsung will reduce their Chinese manufacturing capacity by up to 50% in the coming years.

Buoyed by the high-profile presence of premium brand manufacturing in the nation, India's government will inevitably become more aggressive in how it competes.

It will double down on efforts to attract more manufacturers, extending incentives such as its current Production-linked Incentive Scheme (PLI) to tempt them to set up for business there, helping facilitate local partnerships and making investments in infrastructure to support new manufacturing.

The big names in tech - and not just Cook - have seen this coming for a while.

Look around the top table of almost any tech firm and you'll find Indian tech execs well represented. Microsoft CEO Satya Nadella met with India PM Narendra Modi this week, after which he wrote: "It's inspiring to see the government's deep focus on sustainable and inclusive economic growth led by digital transformation and we're looking forward to helping India realize the Digital India vision and be a light for the world."

The inevitability of gradualness

In a sense, it was always going to be this way. A lot of software is already written on the sub-continent - Apple even has its own campus there - so it's a natural progression that hardware manufacturing would follow.

Of course, India is not China. There will be unique challenges to any business seeking to expand its presence in the nation. Regions can differ in their business priorities, and many key components can't yet be manufactured there. The country also has challenges around infrastructure, which poses additional sets of problems, has its own internal tensions, and shares borders with nations with which it has its own political tensions.

All the same, the inference of this piece must surely be that India is now set to play an even more important part in the future evolution of the tech industry.

Apple simply shone its light on the emerging path.

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