Apple iPhone manufacturing will commence in India by the end of April 2017
Extensive negotiations have taken place between Apple and India regarding opening a manufacturing plan for iPhone. CEO Tom Cook and Indian government officials completed long talks recently. These discussions took place in May 2016. Priyank Kharge, the Minister of Information Technology and Biotechnology, recently made the announcement. A manufacturing facility will be set up in Karnataka, the tech capital in Bangalore.
Apple is keen to take a large slice of the booming mobile phone market in India
India has just surpassed the US, becoming the second largest cell phone market in the world. China is still the leader in this market. India currently has 300 million mobile phone users. By 2021, this will likely jump to 810 million users.
Currently, India considers iPhone only as a luxury status symbol. Prices range between $194 up to $1164 for the latest iPhone 7 plus. The most common iPhone sold to wealthy customers is around $450. That is too expensive for most of the population.
The average monthly wage in India equates to approximately only $295 per month. Apple’s competitors can corner the Indian market with phones in the range of $100-$200.
The arrival of Apple in India is set to benefit both parties
Apple has been a demanding negotiator. They realize their presence will provide employment and high investment into the nation. Indian’s will be able also to see a drop in the price of iPhone, and they will become more widely available.
India enabling Apple to open a plant in the country shows that it is the most open economy in the world for foreign direct investment.
India does, however, have extremely strict laws surrounding foreign companies. The nation has a compulsory “Made in India” policy. India demands that 30% of all components within any product are locally sourced. By opening a manufacturing facility in India, this should be feasible for Apple.
Apple’s biggest rival, South Korea’s Samsung, already has a manufacturing facility in India
Samsung holds 25% of the Indian mobile phone market. Apple owns only 2%. However, it does control 50% of the premium phone market. Globally Apple sells around 78.3 million iPhones, yet only 2.5 million iPhones shipped to India in 2016.
Other brands that corner the market in India are Chinese. These, for example, are brands such as Gone, Lenovo, Vivo, and Xiaomi. China has manufacturing plants in India as well.
The plant in India will be set up by the Taiwanese company Wistron Corp.
In the past, Apple has manufactured their phones in conjunction with Foxconn. Foxconn is also a Taiwanese company, and it has been their largest manufacturer. It runs the biggest iPhone manufacturing plant in the world, located in China.
Initially, Apple will begin with assembling iPhones at the facility. It plans to then progress onto total production. To satisfy this, Apple has demanded a 15-year tax holiday. The rationale being that they can more quickly initiate import of equipment and components. The Indian government has not responded as to whether this is acceptable.
Currently, Apple sell their products to the public in conjunction with local sellers
India has previously rejected Apple’s alternative idea of selling refurbished iPhones. Specifically, this could have theoretically brought prices down. However, India also has strict environmental laws and rejected this on those grounds.
The fear was that this would cause a violation of hazardous waste rules. India will relax its sourcing standards in this deal for three years, with a potential 5-year extension. Apple stores will be set to open once they are manufacturing within the country. Up till now, they have had no permission.