It seems Apple is willing to localize manufacturing operations in order to expand into what’s expected to become one of the biggest smartphone markets in the world after China. Indian officials say the iPhone maker has agreed to set up shop there and will begin building iPhones in India by the end of April.
Apple seals the deal with India
We’ve been hearing about Apple’s designs on the Indian market for quite some time, and although the company has not said much officially about opening factories there, it has not been a very well-kept secret. Media outlets have been reporting that a factory in India might soon by churning out iPhones, and we now have official confirmation of this.
Karnataka State Information Technology Minister Priyank Kharge told Bloomberg last night that Apple will soon be making iPhones there. The company reportedly met with him last month to nail down the timeline for the move, although apparently, it’s been in the works for more than half a year. Apple CEO Tim Cook reportedly met with Indian Prime Minister Narendra Modi in May 2016. He called India “the place to be” on the company’s earnings call earlier this week.
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Taiwan-based Wistron, a key supplier for the Cupertino, Calif.-based tech giant, will assemble the iPhones in Bangalore, widely considered to be India’s tech capital.
Apple wants to take a bite out of Samsung
Apple has been experiencing slowing sales in China for several quarters now, so it’s looking for new growth markets. Samsung currently rules India, where Apple has barely managed a place among the top ten smartphone manufacturers, according to Counterpoint Research. The company sold only 2.5 million iPhones there last year, although it’s been looking to boost that number by opening retail stores there.
One thing that could be a barrier to entry for the iPhone maker, however, is the fact that Indian consumers are extremely price-sensitive. Thus, the company must do everything it can to reduce prices there. While setting up shop is an important step, it remains to be seen whether the U.S.-based firm will be able to push prices low enough for Indian consumers to be able to afford them. By targeting the market now, the company is betting that increasing incomes in the country will make consumers there able to afford its pricey iPhones.
Apple brings demands to Indian officials
One of the reasons Apple probably took so long to seal a deal with Indian officials is because of the lengthy list of demands it reportedly brought to officials. It has been negotiating with the federal government there and has demanded lofty incentives such as a 15-year period when it can important components and equipment to India. Among the country’s requirements for single-brand retailer is that 30% of components for their products are sourced within its borders. Local manufacturing should help.
Kharge promised to help the iPhone maker if it decides to work with other contract manufacturers in the country. However, he also said that they didn’t talk about any additional incentives.
iPhones made for India
The country is very focused on bringing international companies into its borders to manufacture goods for its own citizens. Kharge told Bloomberg that the iPhones that will be made in Bangalore will be for the Indian market, demonstrating that Apple won’t abandon the operations it has in China.
India’s goal of having companies making goods for its own citizens seems very similar to what U.S. President Donald Trump wants to do as Modi seeks to further his “Make in India” initiative. Perhaps this is one reason relations with India haven’t gotten quite as bad as the nation’s relations with other countries have gotten.
However, Trump has gotten blasted for wanting to bring manufacturing back to the U.S., as companies say it’s simply too expensive. Labor in India is much cheaper than it is in the U.S., although there have been reports that Apple suppliers have been looking into whether it’s even possible to bring manufacturing operations from China to the U.S.