In today’s Finshots, we look at Tata Electronics' $750 million deal to acquire Apple’s first iPhone manufacturer in India.
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The deal is finally done — Tata Electronics is buying 100% of Wistron’s iPhone manufacturing business in India. And everyone’s calling Tata the first Indian iPhone maker.
But wait…isn’t Tata already making some stuff for Apple?
It is. When Tata Electronics was set up in 2020, it had set its eyes firmly on making the iPhone. But the first green light it got was only to make the enclosure or casings for Apple at its plant in Hosur. So Tata probably thought, “How can I save myself the trouble of setting up a brand-new factory and then the hassle of convincing Apple of my tech chops?” The answer was — just buy an existing Apple-certified factory.” Ergo, the acquisition of Taiwan-based Wistron’s India operations.
And as per a report in Rest of World, Tata has been doing everything in its power to get ready for what’s going to come next.
For instance, Tata’s training ‘factory-ready’ students by teaming up with local colleges. It has a unique ‘Digital Manufacturing’ diploma that’s a mix of on-the-job training and classroom programmes. And for 200 of its women workers, it’s even sponsoring a BSc in Manufacturing degree. Oh, and not to forget the crucial bit — it’s poaching engineers from rival Apple manufacturer Foxconn.
Yup, Tata is dead serious about taking a nice slice of the Apple pie. And it’s not surprising why that’s the case.
See, Apple’s hell-bent on diversifying its manufacturing beyond China. And India seems to be shaping up to be their preferred destination. We’re doling out incentives for manufacturing electronics. And don’t forget that labour is abundant and still fairly cheap. So if you believe the rumours, half of all iPhones could be made in India by 2027.
But wait… if there’s so much happening here, why on earth is Wistron exiting the iPhone business? Should Tata be worried about something?
Well, the primary reason appears to be that despite being Apple’s first supplier in India, Wistron hasn’t grown much. In fact, it isn’t actually a full-fledged manufacturer for Apple. It’s just an assembler. Wistron remained a tiny cog in the wheel. And that meant that it couldn’t squeeze Apple for higher margins for the work that it did. Apple would’ve just packed up and moved the business to its other suppliers.
The Economic Times also says that Wistron couldn’t get its foot in the door for the more lucrative ‘vendor-managed inventory holding’ either. Think of this as a warehouse that keeps all the components needed to make an iPhone. They forecast demand. And then, when the time comes, these components are quickly sent for final assembly to wherever it’s needed. This way, Apple needn’t break its head over inventory.
If Tata gets stuck in the same rut as Wistron, its money-making prospects will hit a wall.
The competition is intense too.
See, Apple has two big suppliers — Foxconn and Pegatron who’re both expanding in India. And the thing is, Apple has been in a relationship with Foxconn for at least two decades now. That means the China+1 diversification strategy can be executed in India through these existing relationships itself. These entities have far more experience in this business than the fledgling Tata Group. They’re bigger manufacturing experts. And Foxconn and Pegatron are already engaged in inventory management for Apple.
So why would the iPhone maker move its business into Tata’s camp?
Not to forget that Tata hasn’t quite made a great first impression either.
What do we mean?
Okay when Tata set up its factory in Hosur, a town in Tamil Nadu that’s close to the Bengaluru border, it was done in record time. Everyone was quite surprised at the quick progress and they expected big things from the Indian conglomerate. Unfortunately, when Apple asked for 25,000 cases or enclosures a day for the iPhone, Tata stumbled. It couldn’t churn out that many of them. But that’s not the worst part. 1 in 2 cases were found to be faulty. They were defective and didn’t meet Apple’s high standards.
Having said that however, this was to be expected. You can't just set up a manufacturing plant and hope to produce something overnight with absolutely no defects. There's a learning curve — a steep one at that. And Tata is likely on this path for now.
So yeah, Tata might buy out Wistron, but it’s going to have its work cut out. And the word on the street is that Tata’s throwing money at Wistron’s Taiwanese management in a desperate bid to get them to stay and offer their expertise.
It’s not going to be easy. And now we’ll just have to wait and see how Tata’s Apple ambitions play out.
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