Many Apples a Day to Keep Unemployment at Bay

Tim Cook, the CEO of Apple, is India's newest celebrity. The opening of the first Apple store in India, in Mumbai and Delhi, is all the rage. Tim's face is all over print, online and social media. Apple users and lovers have waited in queues for the store launch. The allure of the Apple store experience and India's penchant for shopping would mean footfalls will remain high.

The question though is how many Indians can afford an Apple product. Among the countries which have an Apple Store, India has the lowest per-capita income.

However, what India has is size. Even with average per capita income below USD 3,000; India has ~70 million households (~300 million people) who can afford an i-phone or an apple product. That is indeed a large market. Apple is playing in India on the proverbial hope of the rising Indian consumer class.

However, what is getting us excited is not Apple opening its store. It is Apple producing its products in India and exporting to the world.

Apple's suppliers, Foxconn, Pegatron and Wistron began assembling the i-phone in India in 2021. From 1% of global production, reports suggest that as of March 2023, India is producing ~7% of global i-phone production. An earlier Bloomberg report had suggested that Apple is looking to increase it to 25% by 2025-2026.

Apple sold ~USD 200 billion worth of i-phones in 2022. Assuming it has a 50% margin, that would mean, Apple's suppliers make i-phones worth ~USD 100 billion. 25% of that would mean the Indian assembly would be about USD 25 billion by 2026. assuming 80% of that is exported, that would mean USD 20 billion of gross exports.

An operation of that size would spawn an eco-system of companies, technologies and skill levels which would be helpful in other aspects of electronics and consumer durables production.

India needs many more such investments from global producers. It is imperative that Apple succeeds and crowds in other fortune 500 global corporations to look at India as a production, assembly, outsourcing base.

Slide with two charts titled “The Government stepped in; but it’s clearly not enough to drive Growth.” Left chart shows the government share of investment projects under implementation rising from about 50% in 2012 to nearly 67% in 2022, while the private sector share declines. Right chart shows government capital expenditure by center and states increasing from 2017–18 to 2023–24, with total spending reaching 5.8% of GDP.

Slide titled “Indian Investments and Manufacturing is missing in action.” Left chart compares private investment as a share of GDP in India and China from 2002–03 to 2020–21, showing China consistently much higher while India rises until around 2007–08 and then declines. Right chart shows share of global manufacturing value added from 2004 to 2020, with China rising strongly, the US and EU gradually declining, Japan falling, and India remaining low and mostly flat.

Slide titled “China + 1 = Vietnam, not India,” with three line charts comparing China, India, and Vietnam from 2000 to the early 2020s on investment-to-GDP, FDI inflows-to-GDP, and exports-to-GDP.

Slide titled “Private Sector: Recovering now after high leverage, falling sales and low profitability,” with four charts showing Indian corporate trends from the early 2000s to 2021–22. Corporate sales growth and GDP growth fluctuate, borrowings-to-net worth decline after peaking in the mid-2010s, profitability falls for several years before recovering, and banks’ stressed assets rise sharply until 2017–18 before easing thereafter.

Stacked bar chart showing residential absorption in Bengaluru, Chennai, MMR, NCR and Pune.

Slide titled “India needs an Investment Decade like that of 2003–2013..” Left chart shows annual increases in projects under implementation from 1997–98 to 2021–22 in both US dollar terms and as a share of GDP, with the strongest surge during the mid-2000s to early 2010s, followed by weaker and volatile growth. Right infographic shows a projected sectoral capex pipeline totaling INR 99.52 trillion, led by power, oil and gas, China+1, railways, defence, data centers, automobiles, steel, cement, and chemicals.

Slide titled “To prevent the Demographic Dividend to turn into a Disaster.” Left chart shows India’s labour participation rate and employment rate from 2016 to 2023, both trending downward with a sharp dip in 2020; the employment rate remains below 40%. Right table outlines labour force projections to 2031, showing a current labour force of 440 million, a total projected labour force of 580 million, and a need to create about 140 million additional jobs, or roughly 38,500 jobs per day.

Contact details slide with four profile cards listing names, titles, regions, mobile numbers, and email addresses for Arvind Chari, Sam Tully, Kevin Heller, and Roger Mortimer, along with small headshots.p>

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India not only needs the investments, but it needs these investments to create jobs for its young population.

Apple's suppliers have created 100,000 direct jobs in the last 2 years. As they scale capacity, they will create more jobs. The pleasing aspect is that 70% of these jobs have gone to women.

India needs to create ~>27,000 jobs per day for the next 10 years to absorb its growing young workforce. It will need to add more, to absorb movements away from agriculture. India's dismal female labor force participation will also rise as salaries rise enough to motivate women to seek work outside the homes leading to more job demands.

Getting Apple into India is indeed a success. The Government's Production Linked Incentive (PLI) which is applicable to Apple's suppliers as well is ambitious. The government will dole out incentives worth USD 25 billion in a 5 year period and estimates production value of ~USD 400 billion and new job creation of 6,000,000. That is ~3,750 jobs per day over the next 5 years.

For India's demography to remain a Dividend and not turn into a disaster, India needs Many Apples a Day to keep unemployment and social tensions at Bay!