Apple comes to Bengaluru: What does this mean for India?

Apple To Make iPhones in Bengaluru


Apple has come to Bengaluru with Wistron, its manufacturing partner from Taiwan, establishing a plant at Peenya, Bengaluru. This facility is expected to be used to make and assemble iPhones from April, 2017. Tim Cook, the Chief Executive Officer (CEO) of Apple had met Prime Minister Narendra Modi earlier this year.

It was at that meeting that the Prime Minister of India explained to him the need for manufacturing in India. In fact, Apple also agrees to the fact that India represents an important market for growing the company.

How did it happen?

It was on February 2, 2017 that the Karnataka Government gave the permission to Apple to assemble phones in the state. The decision of Apple to initiate production in India has also received a warm welcome from Priyank Kharge, the Information and Technology Minister of Karnataka.

The importance of this decision

This decision of Apple to set up a manufacturing and assembling facility in India is perhaps a reflection of the general importance it accords to the country as a market with some major potential down the line. The major problem that Apple was facing at that time was the rule that they had to procure a certain amount of their raw material from India.

India, after all, does not compare to countries such as China when it comes to having a component supply chain that is firing on all cylinders. A previous report by the Times of India had detailed Apple’s search for a certain amount of flexibility with regards to product packaging.

The need for flexibility

Apple wanted that flexibility in order to make sure that its products were in agreement with the organisation’s design language. It is expected that by manufacturing in India Apple will be able to sell its products at a lower rate.

Normally in India, when you import goods you need to pay a duty of 12.5% on their value. It is expected to help Apple become more competitive in the Indian market. As it is, Apple has a commendable share of the market in India for highly-priced products.

What happened in 2015 and 2016?

During January 2016 Apple had asked from the national government “to import and sell its certified pre-owned iPhones in India; and to manufacture and sell its certified pre-owned iPhones in India.” In July 2015, too, Apple had come up with a similar plan only for the government to reject it.

What does this mean for India?

As has been stated already, this is good news for Indians who would now be able to buy iPhones and other products from Apple for a lower price. As it is, Apple has always maintained high standards when it came to prices.

Even then, people in India have always had to pay a higher price for Apple products compared to other countries. In 2016, NDTV had stated in a report where it had stated that the prices of Apple products in India are among the highest in the world and one of the major reasons for that is the high import duty placed on them.

The biggest benefit of this decision for consumers in India is in the fact that from now on, there would be little or no need for imports.

How will it help the IT industry in India?

According to Kharge, this decision of a tech giant like Apple will help create an environment of the latest and best technological developments in the state that will lead to developments in the supply chain system as well.

According to the Wall Street Journal, the Karnataka Information and Technology Minister feels that this will help India compete better on the global IT stage as well.

The ‘Make in India’ context

This decision of Apple also fits right into the scheme of things for the ‘Make in India‘ programme initiated by PM Modi. The Financial Times has stated that Apple has made it very clear that it will only start working after it is given some concessions that it has been looking for.

Ideally, they would be looking to avoid paying import duty on various components and having to import a third of the raw materials from suppliers in India.

Apple’s sales in India

In 2016, Apple had sold almost 2.5 million iPhones in India. As huge as the number may sound, it did not rank higher than tenth among all the vendors for the quarter that ended in December. As of now, Apple does not even make up 2% of the shipments entering the country.

One of the major reasons for this is the fact that in India, as well as elsewhere in the Indian Subcontinent, the cheaper phones are still selling more than the highly-priced ones. Apple’s prices are quite high and it is expected that when it starts making and assembling phones in India, this issue would be solved properly.

As the Financial Times says, on an average a smartphone costs US$145 in India compared to the average of US$400 for an iPhone. No matter what happens, Apple will always face an uphill task of winning the battle for market supremacy in India.