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Apple's Plan for Selling iPhones in India?

To build them there

February 6, 2017 | Mobile

Government officials from India’s Karnataka state announced that they have accepted a proposal from Apple to begin assembling iPhones in the country for the first time. Several media reports indicated that iPhones would be assembled in or near Bengaluru, a city considered the center of India’s tech and startup sectors. Priyank Kharge, an IT minister for Karnataka, told Reuters that he believed Apple would “tentatively begin manufacturing iPhones in the state by the end of April or beginning of May.”

Apple’s motivations for setting up shop in India are obvious—eMarketer estimates just more than one-fifth of the country’s population will own a smartphone by the end of the year, giving Apple and competing manufacturers a largely untapped market of new customers. Apple’s India strategy is also a hedge against its maturing position in countries where it has experienced lots of success, but where the iPhone is nearing its saturation point among consumers.

The manufacturing giant has made no secret of its designs in India. CEO Tim Cook visited the country in May 2016, to glad-hand Prime Minister Narendra Modi and announce the creation of an app design and development accelerator in Bengaluru. In July, Cook confirmed that Apple planned to open retail stores in India, although that has yet to happen.

But so far, Apple has not been able to replicate the iPhone’s blockbuster sales seen in countries like the US and China. According to data from Counterpoint Technology Market Research, Apple was the 10th-ranked smartphone manufacturer in terms of shipments in India in Q4 2016. Counterpoint noted that Chinese manufacturers—like Oppo, Xiaomi and Vivo—that offer inexpensive devices snagged a 46% share of smartphone shipments for the quarter, a reflection of price-conscious consumers dominating the market.

However, Counterpoint also noted that Apple controlled 62% of the market share for devices priced above $650, a sign that there could be pent-up demand for iPhones, but that many consumers in India may not be able to afford them yet. That’s not to say Apple hasn’t thought about these price-sensitive consumers. Last year, government regulators shut down a plan by Apple to sell refurbished iPhones at a deep discount over new devices, saying it would create too much electronic waste.

Apple reportedly spent months hashing out the details of its manufacturing and assembly plans in India, and for good reason. Under the government policy initiative “Make In India,” designed to draw more manufacturing to the country, foreign-owned single-brand retailers like Apple are required to source at least 30% of the components for their goods domestically—following a grace period of several years.

In practical terms, Apple itself would not actually manufacture or assemble any iPhones, instead contracting an outside company to handle the details. Several media reports named Taiwanese manufacturer Wistron Corporation as Apple’s contractor of choice for operations in India.

—Rahul Chadha

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