🧐 ProPicks AI October update is out now! See which stocks made the listPick Stocks with AI

Apple may need to turn to China after Indian Tata plant fire, sources say

Published 10/01/2024, 07:39 AM
Updated 10/01/2024, 09:00 AM
© Reuters. FILE PHOTO: Vehicles pass through the security check at the entrance of Tata Electronics Plant in southern India which makes Apple AAPL.O iPhone component in Hosur, Tamil Nadu, India, September 28, 2024. REUTERS/Haripriya Suresh/File Photo
AAPL
-

By Munsif Vengattil

BENGALURU (Reuters) - Extensive damage from a fire at Tata Group's Apple (NASDAQ:AAPL) iPhone component plant in southern India could hamper production ahead of a festive season sales surge, an industry watcher and a source said, forcing the U.S. firm's suppliers to arrange critical parts from China or elsewhere.

The weekend blaze has caused an indefinite production halt at Tata's Hosur plant in Tamil Nadu, the only Indian supplier of iPhone back panels and some other parts for both contract manufacturer Foxconn in the country and its own iPhone assembly at another plant.

Hong Kong-based Counterpoint Research told Reuters it estimates local sales of 1.5 million units of iPhone 14 and 15 models during the Indian festive season which runs from late October to early November, with Apple struggling to fulfil as much as 15% of that demand due to the fire.

"There will be a 10-15% impact on production of older iPhone models from India. Apple could offset that impact by importing more components, and by re-routing more export inventory towards India," said Neil Shah, a co-founder of Counterpoint, which has for years tracked Apple's global shipments.

Apart from local sales, Tata, one of India's biggest conglomerates, also exported iPhones to the Netherlands and United States as well as some parts to China, worth more than $250 million overall, in the year to Aug. 31, commercially available customs data shows.

Tata declined to comment.

Apple suppliers typically carry a three- to four-week stock of back panels, Counterpoint said. An industry source with direct knowledge of the matter estimated, however, that Apple was likely to have stock for eight weeks, and therefore would not see an immediate impact.

However, they added that if the production suspension continues, the U.S. company could set up another assembly line in China or add shifts there to secure parts for India's iPhone manufacturers.

Supply chain disruptions more generally have cast a shadow over Prime Minister Narendra Modi's drive to attract foreign investors to "Make in India", especially in the electronics sector.

Apple has been diversifying beyond China but last year separate fire incidents in India caused suppliers Foxlink and Pegatron to briefly halt operations, with authorities finding much of the fire safety equipment at Foxlink's facility was not functional. Contractors Wistron and Foxconn have also been hit by labour unrest in recent years.

"These are temporary setbacks," said Prabhu Ram, vice president at Cybermedia Research. "Continued efforts to improve safety and operational standards are crucial for strengthening India's position as an emerging global electronics manufacturing hub."

Tata is among Apple's newest suppliers in India, which analysts estimate will contribute 20-25% of total global iPhone shipments this year, up from 12-14% last year.

© Reuters. FILE PHOTO: Apple iPhones are seen inside India's first Apple retail store during a media preview, a day ahead of its launch in Mumbai, India, April 17, 2023. REUTERS/Francis Mascarenhas/File Photo

The fire-hit plant employed 20,000 workers. Another unit in the same Tata complex was due to start making complete iPhones later this year and it is unclear if the incident will cause this to be delayed.

Tata has another iPhone plant near Bengaluru, which it acquired from Wistron last year, and a second one in Tamil Nadu near Chennai, which it is set to acquire from Pegatron.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.