Apple driving growth in India's air cargo sector, but at a cost - The Loadstar

Growth in India’s electronics industry has boosted air cargo – but at the expense of some lower-margin verticals.

US tech giant Apple continues to expand its iPhone exports out of India, where it aims to produce a quarter of its smartphone variants by 2025 – its latest iPhone 16 series is lined up for local production.

And Apple seems to be well on track to fulfil its intent: the tech giant has three contract manufacturers in India for iPhone production – Foxconn, Pegatron and Wistron – and according to new data, the value of iPhone exports from India hit $5bn in the April-to-August period, the first five months of fiscal year 2024-25, year-on-year growth of 54%.

Tata Group last year took over Taiwan-based Wistron’s operations in India, a move that industry observers believed would drive “captive” freight opportunities for its aviation bet, Air India, which is undergoing a massive makeover.

Airlines and related logistics service providers targeting India’s air cargo trade have focused their gaze on the potential of electronics shipment demand, as they step up freight load capacity and networks to capitalise. India’s electronics exports soared 23% year on year in the fiscal year that ended in March, according to government data.

Suneet Gupta, global head of cargo community systems at Mumbai-based Kale Logistics Solutions, told The Loadstar ecommerce and electronics volumes had been a catalyst for Indian air cargo development, with airlines generally reporting 15% to 20% growth.

“The introduction of Tata as a dedicated carrier for iPhones has provided a notable boost,” Mr Gupta said. “With iPhone Pro production shifting to India, the prospects for further expansion are promising.”

But trade stakeholders believe more electronics volumes have also made air freight costlier, adding to the impact of higher jet fuel prices for shippers.

“The increased export of electronics, particularly mobile phones, to regions such as South Asia, Africa and the Middle East has led to a notable rise in air freight volumes,” Pushpank Kaushik, CEO and head of business development for Indian subcontinent, Middle East & SEA, of Hyderabad-based diversified maritime group Jassper Shipping, told The Loadstar.

“This traction has driven up air freight rates as well,” he added.

While trade expansion is good news from a broader economic view, elevated freight rates crimped the ability of other Indian industry verticals traditionally working on tight margins. For example, flower exports out of Bengaluru Airport – India’s top air cargo complex for perishables – saw a 20% drop between 2017-18 and 2023-24, according to available data.

Additionally, longer transits on the ocean leg, due to the Red Sea crisis, became a source of concern for cold chain cargo shippers searching for alternatives to air.

India wants to be an electronics production powerhouse, with an ambitious $500bn target by value by 2030, according to a report published recently. At present, exports from this segment are pegged at some $25bn annually, representing less than 1% of the global market.

“The global electronics market, valued at $4.3tn, is dominated by China, Taiwan, the US, South Korea, Vietnam and Malaysia,” the report noted. “By capitalising on emerging opportunities, enhancing value chain integration and overcoming existing challenges, India can transform its electronics sector into a cornerstone of economic growth.”

That necessitates large-scale supply chain enhancements. Ramesh Mamidala, head of cargo at Air India, told The Loadstar India would have about 50 freighters operating over the next few years, up from some 16 now.

Apple is mandated to reach $8.9bn in exports under a production-linked incentive scheme it inked with the Indian government for the current fiscal year, and the latest data is a clear sign it’s well on track.

Electronics shipments have measurably contributed to India’s merchandise export basket in recent years – steadily expanding that share to 6.7% last fiscal year, from 2.7% in 2018-19.

Check out this clip from The Loadstar podcast on what to expect from the 2024 air cargo peak season – Niall van de Wouw, chief airfreight officer, Xeneta