APPLE- Made in India

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.