After his visit to India, Tim Cook announced
Apple is planning to set up a manufacturing unit in Bengaluru. This decision
has been welcomed and considered a big boost to the ‘Make in India’ campaign.
However, whether Apple will benefit from this is debatable.
Here is what this decision means for India.
India is a crucial market for Apple in terms
of future growth, considering that the US, Europe and China markets are
pretty saturated. However, it presently commands a mere 1.1 percent market share, as
opposed to its rival Samsung, which has around 22.6 percent of the market and
is the clear leader in India. Apple has
ambitious plans of taking its revenue to $3 billion in two years, which is
twice its current revenue in India.
Benefits
for India if Apple sets up its manufacturing unit:
1. If iPhones are manufactured in India,
then they would automatically be a whole
lot cheaper as the imports and the duties would be taken away. Thus, the
pricing would finally match the international pricing of the phones. It would
definitely mean a more decently priced device rather than the now overpriced
version.
2. Manufacturing within the country can
make it much easier for people to not only buy the products but also to repair
them as the time taken will be lessened.
3. With Apple stores, users will be able
to buy directly from the local stores,
without having to queue up outside distributor outlets in the country.
4. If Apple begins manufacturing in India,
then the wait will be shorter and Indians will get their iPhones along with the
rest of the world. They won’t be the
last ones in queue anymore.
According
to a Morgan Stanley report, India is expected to beat the US to become the
second-largest market for smart phones next year.
A
rather shocking fact is that Apple has shown no intentions of making dual sim phones. This seems to be in
stark contrast to Samsung, which not only makes dual SIM variants of its
flagships phones, but also exports devices it makes at its Indian plants.
The local team has been pushing for a dual-SIM
iPhone, a feature that is present on over 80 percent of the smart phones
selling in India. If Apple plans to make its smart phones in India, and for
India, it seems a bit pointless to not have features which are the most
demanded in India. Its rivals such as Google, keep regularly engaging with Indian consumers as well as the government; Samsung has
been making in India since before the ‘Make in India’ campaign even started. Apple
certainly has to collaborate more with Indian advisors if they intend to
increase sales.
Currently, most
part of the iPhone sales in India is driven by the older models which are
priced around Rs 20,000. Many rival
firms sell phones with the exact features that Indian consumers demand, like
dual-sim, easy synching with android, USB and flash drives and many others in a
range of just Rs9,000-Rs 15,000, none of which iPhone offers. The high prices
of iPhones are also due to Apple’s policy of gaining high margins on the sale
of each phone rather than focussing on bulk of sale; a policy that will hinder
its success in a populous country like India.
Apple has also been keen on getting
permission to import and sell refurbished iPhones in India. A similar proposal
by the company was rejected by the environment ministry in 2015, and even the
ministry of telecommunications reportedly had some reservations about it. The
industry ministry also opposed this proposal.
This decision must not have been an easy one for Apple, given
that it will have to source about 30
per cent of inputs locally. How they cross this hurdle will be
interesting, especially since the company has sought exemption from this norm. The finance ministry had turned down
this application.
Earlier, the company had also sought
a change in the labelling norm of the government so that the aesthetic value of
its products is maintained. It has also reportedly sought a 15-year customs
duty holiday on imports of iPhone kits, new and used capital equipment, and
consumables. The inter-ministerial panel has a tough decision to make, as
offering any fiscal or other incentives specifically to Apple, could invite
criticism from others that are going to be or have been deprived of such
benefits.
Also, GST is set to be rolled out in July.
It will subsume taxes such as central excise duty, service tax, countervailing
duty, value-added tax, octroi and purchase tax. This will have a major impact
on tax exemptions offered now and Apple might not be able to avail the
relaxations it seeks. These exemptions and relaxations are important for Apple because
its component makers (mainly in Thailand and Singapore) may not relocate
immediately to India, increasing its dependence on imported parts.
Despite the initial teething problems, this may
prove to be a very profitable venture for Apple in the long run since it
already has good repute, especially in the country’s youth. If it manages to
harness the domestic potential and cater to local demands, it can make great
use of the strength of the market it is investing in, a large consumer base.
