Apple has agreed to deal with the Indian government for the state of Karnataka to start the manufacture of iPhones in Bangalore, India, as reported by The Times of India. It was announced by the Karnataka government that it approved Apple’s proposal to start the initial manufacturing operations during a press release.
The desire of Apple to open up a manufacturing hub in India started after Narendra Modi; the Prime Minister started promoting his Made in India initiative. Wistron, the manufacturing partner of Apple will start making iPhones in a new plant, and they will reportedly begin with the Apple iPhone 8.
Over the period of past couple of months, Indian officials and Apple began thinking about the possibility of manufacturing the products locally. Apple chose a Karnataka-based facility last month over competing bids from other states like Gujarat, Maharashtra and also Telangana. During the negotiations, Apple was seeking a lot of incentives like tax and others, further including the possibility of long-term duty exemptions as well.
The government said that they are in discussions with Apple for other possible collaborations but declined to mention what they would be. For Apple, this is a pretty major move since it will solidify the company’s foothold in the subcontinent and moreover, they can also access the customer base of India.
The Karnataka government said that it welcomes Apple’s move to begin initial manufacturing from Bengaluru and it is quite certain that the tech major will start production in India by next year. Regarding future growth, India is a great market for the markets in China, US and Europe are quite saturated by now.
The decision wasn’t easy for Apple since it will have to source 30 percent or inputs locally. How the company manages to overcome this hurdle will be interesting to see since the company has already sought exemption from this norm.
There is also a possibility that the government could start a concession, considering the fact that getting Apple to make in India will be a proud badge that the Modi government can wear on its sleeve.
Considering the fact that both Wistron and Foxconn are in India, manufacturing will be quite easy for Apple. Meanwhile, Apple seems to have decided that Wistron Corp. will be the first company to make the iPhone in India and reports are correct, it will be the iPhone SE. It has been known that the Taiwanese company manufactured both iPhone 5 and iPhone SE and both of them come with a similar chassis.
What does Apple start manufacturing in India mean? First of all, the devices made in India will be cheaper. For instance, the 4-inch iPhone SE has a box price of Rs. 39000 but it is possible to buy the phone in the US for Rs. 30,000. This makes it 10 percent lesser in price. With the privilege of local marketing, it will be possible for Apple to give the best price in India.
What does it mean for Apple? With local manufacturing, Apple will be able to tap into tax holidays and incentives and also the opportunity to begin local single brand retail. There is also the underlying possibility of starting further deals with the government, especially in the education segment.
There is a tendency to perceive Apple as a niche luxury brand; the fact is that the sale of India operations was 1 billion dollars back in 2015, according to a report by livemint.com. As suggested by the report, Apple made a profit of Rs. 294 crores in the year which ended on 31st March 2016 with a revenue of Rs. 9,997 crores.