Apple may turn to China again after Tata factory fire in India

Reuters reported that severe damage caused by a fire at Tata Group’s iPhone components factory in southern India could hamper production ahead of the holiday season’s sales surge, forcing the US company’s suppliers to switch manufacturing of critical parts from China or elsewhere.

The weekend fire has indefinitely halted production at Tata’s Hosur plant in Tamil Nadu, the sole Indian supplier of iPhone back panels and some other parts to both contract manufacturer Foxconn in the country and its own iPhone assembly at another plant.

Hong Kong-based Counterpoint Research told Reuters it estimates domestic sales of about 1.5 million iPhone 14 and 15 models during the Indian holiday season, which runs from late October to early November, with Apple struggling to meet up to 15% of that demand due to the fire.

“There will be a 10-15% impact on production of older iPhone models from India,” said Neil Shah, co-founder of Counterpoint, which has tracked Apple’s global shipments for years. “Apple can offset this impact by importing more components and redirecting more export inventory toward India.”

Apart from domestic sales, Tata, one of India’s largest conglomerates, exported iPhones to the Netherlands and the United States, as well as some parts to China, worth more than $250 million in total, in the year to Aug. 31, according to commercially available customs data.

Counterpoint said Apple’s suppliers typically stock a portion of back panels for a three- to four-week production run. However, an industry source with direct knowledge of the matter estimated that Apple is likely to have eight weeks of inventory, so it will not see an immediate impact.

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

The supply chain disruptions have cast a shadow over Prime Minister Narendra Modi’s efforts to attract foreign investors to “Make in India,” particularly in the electronics sector.

Apple had been working to diversify its business outside China, but separate fire incidents in India last year briefly shut down suppliers Foxlink and Pegatron, as authorities found that much of the fire safety equipment at Foxlink’s facility was not working. Contractors Wistron and Foxconn have also been hit by labor unrest in recent years.

Tata is among Apple’s newest suppliers in India, with analysts estimating it will account for 20% to 25% of global iPhone shipments this year, up from 12% to 14% last year.

The factory affected by the fire employed 20,000 workers. Another unit in the same Tata complex is due to start making complete iPhones later this year, and it’s not clear whether the incident will delay that.

Tata has another iPhone factory near Bangalore, which it acquired from Wistron last year, as well as a second factory in Tamil Nadu state near Chennai, which it is set to acquire from Pegatron.