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Apple (AAPL) Starts Producing iPhone 14 in India Ahead of Time

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Apple (AAPL - Free Report) is gradually lowering its dependency on China for producing iPhones by shifting production to India and countries in South Asia like Vietnam.

The iPhone-maker has started producing the latest iPhone 14 in India much sooner than expected, driven by a smooth production rollout that reduced “lag time between Chinese and Indian output from months to mere weeks,” per a Bloomberg report.

Apple unveiled four new iPhone models — iPhone 14, iPhone 14 Plus, iPhone 14 Pro and iPhone 14 Pro Max — on Sep 7, at its biggest product launch event of the year. The company also launched the next-gen Airpods Pro, the Apple Watch Series 8, the new Apple Watch SE, Apple Watch Ultra and updates to Fitness+ at the event.

Apple partner Foxconn is manufacturing iPhone 14 in the Sriperumbudur facility near Chennai. These devices are expected to go on sale in India later this year, per TechCrunch. India has attracted investments from Apple’s manufacturing partners like Foxconn and Wistron in recent years by offering lucrative subsidies.

India is expected to become a major production hub for Apple by 2025. According to JP Morgan analysts, Apple will move 5% of global iPhone 14 production to India by late 2022 and will manufacture 25% of all iPhones by 2025.
 

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Meanwhile, Vietnam will contribute 20% of all iPad and Apple Watch productions, 5% of MacBook and 65% of AirPods by 2025.

Apple is not the only tech major focused on reducing dependency on China and increasing production capacity in India. Apple’s closest peer, Samsung, already has a significant production capacity in the country.

Alphabet’s (GOOGL - Free Report) Google division is planning to produce the Pixel smartphone in India. Google plans to assemble between 500K and 1 million units of the smartphone, which is roughly Pixel’s 10-20% of annual production.

New iPhones to Boost Apple’s Prospects

Apple has been struggling in 2022, primarily due to coronavirus-induced supply-chain disruptions, industry-wide silicon shortage, unfavorable forex and the Russia-Ukraine conflict.

The near-term outlook is not enthusiastic, given the headwinds. Apple did not provide revenue guidance for the third quarter of fiscal 2022. Apple expects COVID-induced supply chain disruptions and the industry-wide silicon shortage to hurt its top line by $4-$8 billion. Unfavorable forex is also expected to hurt revenues by 300 basis points (bps).

Moreover, the absence of revenues from Russia is expected to hurt the top line by 150 bps. Apple paused all sales in Russia during the fiscal second quarter (March quarter).

Nevertheless, the strong pre-order data for iPhones is encouraging for Apple. The company also released iOS 16 for iPhone users. The latest version offers features including new edit, undo send, and mark conversations as unread features as well as a completely customizable lock screen.

Apple shares have outperformed the Zacks Computer & Technology sector and peers like Alphabet on a year-to-date basis.

Apple shares are down 15.3% compared with the sector’s decline of 34.6% and Alphabet’s 31.9% year-to-date decline.

Apple is expected to benefit from the strong momentum of the Services portfolio, of which Fitness+ and Apple TV+ are a part. Apple had more than 860 million paid subscribers across its Services portfolio at the end of the fiscal third quarter.

Zacks Rank & Couple of Stocks to Consider

Apple currently has a Zacks Rank #3 (Hold).

A couple of better-ranked stocks in the same sector are Absolute Software (ABST - Free Report) and Paylocity (PCTY - Free Report) , both sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Absolute shares have increased 13.6% in the year-to-date period. The Zacks Consensus Estimate for ABST’s fiscal 2023 earnings has moved 487.5% higher over the past 30 days to 47 cents per share.

Paylocity shares have increased 0.1% in the year-to-date period. The Zacks Consensus Estimate for PCTY’s fiscal 2023 earnings has been steady over the past 30 days at $3.58 per share.

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