(Bloomberg) -- A key Apple Inc. supplier has begun making components for AirPods in India, marking a significant step in the US tech giant’s push to expand production in the country.

The Indian unit of Jabil Inc. has begun shipping AirPods enclosures, or plastic bodies, to China and Vietnam, where the wireless earphones are assembled, people familiar with the matter said, asking not to be named as the move isn’t public.

Apple is building out production in India to reduce its reliance on China, where US trade restrictions and Covid-related disruptions have made manufacturing more risky. Its India output has thus far been limited to the iPhone, making AirPods the second Apple product now partially manufactured in the country.

Prime Minister Narendra Modi has made it a national priority to grow India’s manufacturing sector, providing financial incentives and government support for companies’ expansion projects. Apple has played a central role in that effort, with partners such as Hon Hai Precision Industry Co. producing more iPhones in the country for the latest generation than ever before.

US manufacturing services provider Jabil operates a 858,000 square foot (80,000 square meter) facility employing more than 2,500 workers in Pune, western India, according to its website.

Jabil representatives didn’t respond to a request for comment. Apple declined to comment.

Apple is the world’s biggest maker of so-called true wireless stereo devices, a category that includes earphones and headphones. It shipped 23.8 million units in the third quarter for a 31% market share, according to research firm Canalys.

While India is still some time away from getting Apple to fully manufacture AirPods locally, New Delhi has given initial clearances to more than a dozen of its Chinese suppliers to ramp up via joint ventures with Indian partners. Luxshare Precision Industry Co Ltd., one of Apple’s Chinese suppliers which makes AirPods, is among the companies gaining that approval. Luxshare in 2020 agreed to take over a shuttered Motorola plant in India’s southern Tamil Nadu state, but is yet to begin manufacturing Apple products locally.

Apple’s latest India push comes as Modi’s government is drawing up plans to give financial incentives for local production of wireless earphones and smartwatches, one of the people said.

“Making enclosures is typically the first step for full-fledged production of AirPods,” said Neil Shah, vice president of research at Counterpoint. “Now that Apple has won initial approval for some suppliers including Luxshare, they are obviously building a supply chain for the end product.”

Cupertino, California-based Apple has a long way to go to diversify out of China, which makes nearly 98% of iPhones. Tensions between Washington and Beijing, and a Covid flareup at a major plant in the country exposed vulnerabilities in the company’s supply chain.

Still, the company has made progress with the effort. Partner Hon Hai last year began making iPhone 14 in India just weeks after the model’s global launch, and Apple exported more than $2.5 billion of its devices from the South Asian nation from April to December.

--With assistance from Mark Gurman.

(Updates with comment from researcher in 10th paragraph)

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