Ap­ple’s Ben­galuru iPhone Unit Launch Hinges on Govt Sops

The Economic Times - - Companies: Pursuit Of Profit - @times­group.com

Ben­galuru: A for­mal deal between Ap­ple Inc and a po­ten­tial man­u­fac­tur­ing part­ner for start­ing pro­duc­tion of iPhones in Ben­galuru will come through only if the tech­nol­ogy gi­ant man­ages to ne­go­ti­ate sops for its In­dia in­vest­ments from the Union gov­ern­ment.

“Ap­ple Inc will not come on board im­me­di­ately un­til it com­pletes the on­go­ing ne­go­ti­a­tions with the gov­ern­ment of In­dia,” said a top gov­ern­ment of­fi­cial aware of the de­vel­op­ments, de­clin­ing to be iden­ti­fied. It is not clear yet as to where the ne­go­ti­a­tions stand now.

The Cu­per­tino, Cal­i­for­nia-based com­pany has been seek­ing sourc­ing and tax con­ces­sions be­fore it can be­gin man­u­fac­tur­ing in In­dia through a part­ner. Ap­ple’s mar­ket share in In­dia is smaller than 5% and lo­cal man­u­fac­tur­ing will al­low it to open its own stores in one of the world’s fastest-grow­ing smart­phone mar­kets as sales in China de­cel­er­ate.

Kar­nataka’s in­for­ma­tion tech­nol­ogy depart­ment in a state­ment on Thurs­day sig­naled that the iPhone maker had de­cided to be­gin pro­duc­tion in Ben­galuru. State IT Min­is­ter Priyank Kharge said Tai­wanese com­pany Wistron Corp would man­u­fac­ture the smart­phones for Ap­ple in the city.

Wistron, through an In­dian arm, has a fa­cil­ity at Peenya in­dus­trial sub­urb near Ben­galuru, and is briskly ramp­ing up its man­u­fac­tur­ing ca­pac­ity in an­tic­i­pa­tion of an early deal from Ap­ple. The Tai­wanese firm was mak­ing the in­vest­ments fol­low­ing a green sig­nal from the iPhone maker, the gov­ern­ment of­fi­cial quoted above said.

While Wistron will ini­tially fo­cus on as­sem­bling iPhones, the game-changer for Ap­ple in In­dia will hap­pen when the man­u­fac­turer pro­gresses to the next phase that re­lates to sourc­ing com­po­nents lo­cally.

In­dia re­quires for­eign brands keen to open their own stores in the coun­try to source one-third of their com­po­nents lo­cally for a cer­tain pe­riod. The gov­ern­ment mod­i­fied as well as re­laxed the norms last year but some re­quire­ments have re- mained con­tentious for Ap­ple. The sec­ond phase of Wistron’s iPhone man­u­fac­tur­ing, ac­cord­ing to gov­ern­ment of­fi­cials, is crit­i­cal be­cause it will not only help In­dian com­po­nent mak­ers but also en­able Ap­ple to ex­port the smart­phones from Ben­galuru to overseas mar­kets.

Ac­cord­ing to re­ports, Ap­ple sold 2.5 mil­lion iPhone units in 2016 in In­dia. Alo­cal man­u­fac­tur­ing unit could boost its In­dia sales due to the price ad­van­tage on ac­count of sav­ings on cus­tom duty and other levies.

Kharge said Kar­nataka was will­ing to fa­cil­i­tate any high-end man­u­fac­tur­ing in the state, in­clud­ing that of iPhone. “We are open to pro­vide nec­es­sary in­cen­tives and con­ces­sions if the in­vest­ments are sub­stan­tial,” he said. Ap­ple has not made any of­fi­cial ap­pli­ca­tion with Kar­nataka be­cause it is known to work through third­party man­u­fac­tur­ers. The gov­ern­ment is bullish that man­u­fac­tur­ing of iPhones will be­gin in Ben­galuru in the next cou­ple of months. Kar­nataka may also grant some sops, and the in­vestors are study­ing the fine print of the State’s elec­tronic sys­tem de­sign and man­u­fac­tur­ing pol­icy.

“Wistron is in the process of ex­pand­ing its (Ben­galuru) fa­cil­ity through its In­dian arm. We are sup­port­ing them in terms of faster statu­tory clear­ances for ad­di­tional power sanc­tion, and fire cer­ti­fi­ca­tion,” said Gau­rav Gupta, Kar­nataka’s Com­mis­sioner for In­dus­tries. ET could not im­me­di­ately reach Ap­ple and Wistron for a com­ment.

Kar­nataka, which got 13th place in the ease-of-do­ing-busi­ness sur­vey last year, is leav­ing no stone un­turned to make the Ap­ple project a reality both for its snob value as well as to si­lence crit­i­cism that Ben­galuru is crum­bling due to its traf­fic and in­fra­struc­ture prob­lems.

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