Apple's Asian Shift: China's Loss Could Be India's Billion-Dollar Gain And Cut Cupertino's Geopolitical Risk, Says Munster

Apple Inc. AAPL could reduce its dependence on China in the coming decade, according to Gene Munster, the founder of Deepwater Asset Management.

China’s Loss, India’s Gain: Munster believes Apple’s efforts could alleviate concerns among investors who worry about the company’s heavy reliance on China. 

He anticipates that China’s share of Apple’s revenue will decline from 40-45% to 25-30% over the next five years, with roughly half of this reduction stemming from the shift of production to India.

This shift is significant because, as Munster argues, Apple needs large markets to maintain its projected 5-10% revenue growth over the next seven years. 

See Also: Everything You Need To Know About Apple Stock

“From the demand perspective, India is one of the important parts of Apple's growth story for the balance of the decade,” he said. 

Apple has already opened two new stores in India, and it is in the early stages of expanding its channels and investing in direct-to-consumer initiatives.

Regarding the potential impact of India on Apple’s business, Munster predicts that India’s revenue — currently accounting for 3% or $12 billion of Apple’s total sales — will eventually surpass that of Greater China. Greater China, encompassing mainland China, Hong Kong, Macau, and Taiwan, is expected to contribute 20% or just under $80 billion to Apple’s revenue in 2023.

Made In India: Reports indicate that Apple will start producing AirPods in India, and the overall value of products manufactured in the country is projected to increase fivefold over the next four to five years, reaching $40 billion, as noted by Munster. 

Currently, an estimated 2% of Apple’s revenue is derived from India, but this figure is expected to rise in the coming five years.

The reported target of reaching $40 billion in production in India by 2027 implies a remarkable annual production growth rate of 42% in India. This stands in stark contrast to Apple’s projected 5% or higher revenue growth rate during the same period, according to Munster.

“India is central to Apple navigating China's geopolitical production risk,” he added.

Apple stock fell 0.60% to $175.02 in premarket trading on Tuesday, according to Benzinga Pro data

Read Next: Apple’s ‘Made In India’ Production Could Surge To $40 Billion in the Coming Years

Image by oasisamuel on Shutterstock