Apple will begin assembling iPhone SEs in India starting this summer, according to a new report.
Citing a person familiar with the matter, The Information wrote on Thursday that at least one Apple supplier has been asked to ship iPhone SE components to a facility in India starting in July. Apple (AAPL) - Get Report shares were trading roughly flat on Thursday at $351.87.
Shifting some assembly to India makes sense for Apple on a number of fronts, said Daniel Martins, an independent financial researcher who writes about Apple as the Apple Maven.
"First, the India smartphone market has potential that Apple has not been able to realize properly. The move shows Apple's commitment to this faster growing market, while minimizing the tariff impact by producing locally," Martins said. "Second, Apple's supply chain is arguably too dependent on China, with nearly half of its top suppliers located in the country. Since the trade war with the U.S. picked up the pace in 2018, Apple and other tech companies have been looking for diversification. India has shown interest in being that production alternative."
Assembling iPhone SEs in India helps Apple to avoid a 20% tax on imported smartphones, and potentially to gain a greater foothold in the growing market. Apple earns just 2.2% of its global revenue in India, according to FactSet.
Early sales of the new iPhone SE, which was released in late April, appear healthy.
Based on an analysis of shipping times, the oft-cited TF Securities analyst Ming-Chi Kuo wrote that early iPhone SE sales were “better than expected,” while also cautioning that overall iPhone sales are likely to fall 20% to 25% in the second quarter.
Writing in late April, Loup Ventures’ Gene Munster forecast that the new budget-friendly model will account for about 20% of all iPhone sales over the next 12 months, equivalent to about 30 million total units.
On a shareholder call, Apple CEO Tim Cook pointed to an "outstanding" reception for the new model.
"I have seen a strong customer response to iPhone SE, which is our most affordable iPhone. But it appears that those customers are primarily coming from wanting a smaller form factor with the latest technology or coming over from Android,” Cook said.
Year to date, Apple shares have risen 17%.