Greetings from Taipei! My name is Lauly, and I have been collaborating with my colleagues, Annie Cheng Ting-Fang in Taipei and Sayan Chakraborty in Bengaluru, on an intriguing Big Story about Apple’s supply chain in India. Over the past month, we have conducted in-depth interviews with approximately 20 individuals, including supply chain sources, industry experts, and geopolitical analysts, to gain insights into Apple’s aspirations in the country.
Annie and I have been closely monitoring supply chain developments for years, particularly since the onset of the US-China trade war. During this time, we have observed that the establishment of an electronics supply chain in India has been slower compared to Vietnam and Thailand. This week’s Big Story originated from our curiosity to uncover the reasons behind this disparity. We hope you find our findings engaging!
Meanwhile, the tech earnings season has recently commenced, and a notable trend among suppliers is the surge in demand for generative artificial intelligence, which has consequently led to an increased need for graphic processing unit (GPU) chips, AI servers, data centers, power supply technologies, and more. The growth of the electric vehicle market also serves as a key pillar of expansion for suppliers. Delta Electronics, a company that caters to prominent names such as Tesla and General Motors, is currently engaged in a global expansion endeavor to meet the demands of its clients.
While most suppliers expect inventories of consumer electronics to stabilize, there is still a lack of certainty regarding the actual recovery of demand.
Moving on to our featured story, Apple is intensifying its shift towards iPhone manufacturing in India, with an ambitious goal of relocating 20% of its total iPhone production to the country. Our team, consisting of Lauly Li, Cheng Ting-Fang, and Sayan Chakraborty, reports that Apple is also planning to co-design a new iPhone exclusively in India.
The combination of the pandemic and geopolitical tensions has posed unprecedented challenges to Apple’s long-standing strategy of “designed in California, assembled in China.” Apple’s decision to shift its operations to India aligns with diplomatic efforts by the United States to foster closer relations with New Delhi, emphasizing the role of technology. Simultaneously, India’s relations with China have been deteriorating.
Last October, unrest at an iPhone production center in Zhengzhou, China, caused by a Covid-19 outbreak, significantly influenced Apple’s decision to expedite its transition to India. The disruption in production at Zhengzhou, the world’s largest iPhone manufacturing hub, lasted for over a month during the critical shopping season leading up to Christmas, with no immediate alternative production options available.
India, seizing the opportunity, aims to enhance its electronics manufacturing capabilities. In addition to welcoming Apple’s transition, which has the potential to establish a new supply chain ecosystem, India is also actively seeking to attract chipmakers. Japanese chip equipment supplier Disco, for example, plans to establish a center in India to provide customer support and act as a marketing base for the country’s flourishing semiconductor industry. Meanwhile, US memory chip giant Micron Technology has announced plans for a new chip packaging and testing plant in India, and Applied Materials from the US intends to open a collaborative engineering center in Bengaluru.
Switching gears, South Korean chipmakers SK Hynix and Samsung Electronics dominate 90% of the global market for “high-bandwidth memory” (HBM) chips, which are vital components in the systems used to train AI models like OpenAI’s ChatGPT. While HBM chips initially gained popularity in high-end gaming graphics cards, they still represent a small portion of the global dynamic random access memory (DRAM) market. These chips leverage stacking technology to enhance the bandwidth and performance of graphic processing units (GPUs) in high-speed computers. However, due to their crucial role in the generative AI boom, investor interest in the Korean companies’ dominance of this niche technology is growing.
According to Macquarie analyst Daniel Kim, “HBM chips are a critical component for AI servers. You can’t create extensive language models without them.” In response to the rising demand, both SK Hynix and Samsung Electronics have announced plans to double their HBM chip production next year, even as they scale back operations in other areas due to a supply glut that has negatively impacted operating profits. SK Hynix, in particular, gained an advantage by being the first to mass-produce cutting-edge fourth-generation HBM3 chips, contributing to the success of Nvidia’s H100 GPUs.
Turning our attention to Nintendo, the company is striving to reduce its reliance on video game console sales by leveraging its iconic characters, such as Mario. Nintendo has been implementing an intellectual property-based transformation for nearly a decade, with varied degrees of success. This strategic shift aims to capitalize on the brand’s strength and shield the company’s earnings from the cyclical nature of the video game industry.
To achieve this, Nintendo has ventured into different avenues, including theme parks and convenience store snacks. One noteworthy achievement is the recent release of “The Super Mario Bros. Movie,” a computer-animated feature that has grossed $1.35 billion worldwide since its April 5 premiere, making it the highest-grossing film of the year.
Shigeru Miyamoto, the creative genius behind Mario, expressed his desire in 2019 to develop the character into a competitor for the legendary Mickey Mouse. However, console sales still account for approximately 90% of Nintendo’s revenue, underscoring the company’s ongoing journey to realize its ambitions in the realm of intellectual property.
Lastly, Vietnamese Prime Minister Pham Minh Chinh has called upon Samsung Electronics, the world’s largest smartphone manufacturer by shipments, to nurture local managerial talent in its operations within the country. Vietnam serves as a significant manufacturing hub for Samsung outside of its domestic market, following the company’s gradual withdrawal from handset production in China. Over the course of 15 years, Samsung has invested heavily in Vietnam and currently produces 50% of its devices in the Southeast Asian nation.
During his visit to Samsung’s “strategic production base” in Bac Ninh province, Prime Minister Chinh expressed his desire for Samsung to prioritize the training and development of Vietnamese managers and leaders within the company. Samsung Vietnam exports products to 128 markets and accounts for 17.4% of the Southeast Asian nation’s exports, as reported by the Bac Ninh government.
Vietnam, however, has faced challenges in acquiring the necessary skills, technology, and supplier ecosystem required to ascend the technology manufacturing value chain, following in the footsteps of countries like South Korea. The government hopes that an increased number of high-level local hires will help address this situation.
That wraps up this edition of #techAsia. We hope you found the featured articles and insights informative and engaging. Don’t forget to sign up at Nikkei Asia to receive #techAsia each week. If you have any feedback or inquiries, please feel free to reach out to us at [email protected].
Thank you for your time, and we look forward to bringing you more exciting tech news in the future!
Best regards,
Lauly and the #techAsia team
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