Why Apple stock rallied Monday

The iPhone maker is expanding its production capabilities.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of Apple Inc. (NASDAQ: AAPL) climbed higher Monday morning, adding as much as 2.2%. By market close, the stock was still up 0.23%, even as the broader market slipped.

The catalyst that sent the tech giant higher was reporting that it had begun manufacturing some iPhone 14 models in India.

So what

Apple has long produced the vast majority of its iPhones in China. In recent years, however, the company has been working to diversify its manufacturing footprint, while also expanding its market share in India.

The company has been producing a limited number of devices in India for about five years, but assembly has been restricted to older models, including the iPhone SE. Apple global manufacturing partner Foxconn is producing the locally manufactured iPhones, which will be available to customers in India within days.

Apple issued the following statement: "The new iPhone 14 lineup introduces groundbreaking new technologies and important safety capabilities. We're excited to be manufacturing iPhone 14 in India."

Now what

There are a number of benefits to further expanding beyond its primary factory. Apple has been working to increase its market share in India, but those efforts have been hampered by lower-cost smartphones from competitors manufactured in that country. By increasing its production capacity in India, Apple could reduce the cost of the device for consumers in the local market, and it could also export iPhones to nearby markets, according to reports.

Apple has also been hampered by government efforts to curb the resurgence of COVID-19 in China, which has resulted in lockdowns and manufacturing delays due to shuttered factories. This has shined a spotlight on a potential weakness in Apple's supply chain.

In a note to clients earlier this month, J.P. Morgan analysts posited that Apple would likely move 5% of its worldwide production of the iPhone 14 to India by later this year. Furthermore, Apple could make one-quarter of all iPhones in India by 2025, the analysts suggested.

This is a smart move, particularly since the company generates more than half its revenue from the iPhone. Not only will this provide Apple with additional production options, but also help it tap into the world's second-largest population.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Danny Vena has positions in Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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