IPhone SE Starter on Ap­ple’s In­dia Menu

Tech gi­ant set to kick off lo­cal plans by as­sem­bling 3-4 lakh units of the model at Wistron plant

The Economic Times - - Front Page -

Ruchika Chi­tra­van­shi & Gul­veen Au­lakh

New Delhi: Ap­ple will kick off its In­dia man­u­fac­tur­ing plans by ini­tially as­sem­bling 3-4 lakh units of its iPhone SE model at the Kar­nataka plant be­ing set up by con­tract man­u­fac­turer Wistron, as the maker of the iconic iPhones looks to takes a deeper bite of a key mar­ket amid slow­ing global smart­phone growth.

The Cu­per­tino-based tech gi­ant is likely to go ahead with the Bengaluru as­sem­bly plan with­out wait­ing for the gov­ern­ment’s nod for the list of tax con­ces­sions that it had sought along with other de­mands. The com­pany wants to “ex­pe­ri­ence man­u­fac­tur­ing in In­dia”, a per­son fa­mil­iar with the com­pany’s plans told ET.

“It is Ap­ple’s first such ven­ture in In­dia… The de­mands they have made are for the larger plans of the com­pany to re­ally scale up man­u­fac­tur­ing in In­dia,” a se­nior gov­ern­ment of­fi­cial told ET, re­quest­ing anonymity. A per­son in the con­tract man­u­fac­tur­ing in­dus­try said Wistron is ready to start as- sem­bling the phones. “The duty con­ces­sions are not con­nected to the plant,” the per­son added. Wistron’s fa­cil­ity is set to be­gin as­sem­bling lo­cally from April.

Ap­ple and Wistron didn’t com­ment on queries seek­ing con­fir­ma­tion of pro­duc­tion plans. The big­gest hur­dle pre­vent­ing Ap­ple from corner­ing a larger slice of the In­dian smart­phone pie is its price points which, typ­i­cally, for a new model start at over .₹ 50,000 in a mar­ket where 70-80% of the de­vices are sold in the un­der-.`10,000 seg­ment. This has led to Ap­ple fall­ing way short of its tar­get of sell­ing 10 mil­lion mo­bile phones in In­dia by 2016-17. Start­ing lo­cal as­sem­bly and scal­ing it up to full man­u­fac­tur­ing will help the com­pany price its prod­ucts com­pet­i­tively and cor­ner a big­ger por­tion of the mar­ket where nearly 700 mil­lion mo­bile phone users still use fea­ture phones.

Ap­ple is said to be open to re­lo­cat­ing some plants from China to In­dia due to ris­ing labour costs there

The iPhone SE, launched amidst much fan­fare in April 2016, was widely an­tic­i­pated to be aimed at emerg­ing mar­kets, in­clud­ing In­dia, as it was priced lower than all other iPhone mod­els. But even the lower price tag of Rs 39,000 for a ba­sic model of SE was too much for the mass mar­ket. The hand­set is cur­rently re­tail­ing at less than Rs 30,000 in In­dia and would be­come cheaper still if pro­duced here.

“While the im­me­di­ate ad­van­tage would be the tax ben­e­fit of 10-12% if it is man­u­fac­tured (here) com­pared with im­ports, it will also give Ap­ple an edge in In­dia, which is the fastest-grow­ing large mar­ket, as op­posed to slow growth in China,” said Navk­endar Singh, se­nior re­search man­ager, client de­vices, at IDC In­dia.

If Ap­ple man­ages to cap­ture even a “sliver of this large po­ten­tial con­sumer base which con­sid­ers Ap­ple an as­pi­ra­tional brand, it can ben­e­fit hugely”, Singh said.

The com­pany can spend the sav­ings from lo­cal man­u­fac­tur­ing to strengthen its re­tail and dis­tri­bu­tion chan­nels in In­dia, just like Chi­nese play­ers Oppo and Vivo, Singh said. “So in a way, Ap­ple and In­dia need each other.”

In­dus­try in­sid­ers said Ap­ple could have started by mak­ing the iPhone 5S — its top-sell­ing model — lo­cally, but has cho­sen the iPhone SE as it is the low­est­priced of­fer­ing in Ap­ple’s sta­ble and also amongst the most re­cent, which would sup­port fu­ture iOS up­grades.

In­dus­try ex­ec­u­tives said Ap­ple may phase out iPhone 5S in In­dia in a cou­ple of quar­ters, and pointed out the hand­set has been dis­con­tin­ued­in­manyother­mar­kets and is at the end of its life cy­cle.

One of the per­sons aware of Ap­ple’s plans said the com­pany was open to re­lo­cat­ing some of its man­u­fac­tur­ing units from China to In­dia due to ris­ing labour costs in that coun­try. The plant in Peenya district, on the out­skirts of Bengaluru, could help Ap­ple bet­ter un­der­stand lo­cal man­u­fac­tur­ing and the chal­lenges in­volved, said this per­son.

SEEK­ING SOPS

The iPhone maker has sought a string of con­ces­sions to man­u­fac­ture in In­dia, in­clud­ing a 15year ex­emp­tion from cus­toms duty, as­sur­ance on con­tin­u­ing coun­ter­vail­ing duty ex­emp­tions on elec­tronic com­po­nents for the same time pe­riod, be­sides clar­ity in pol­icy for sell­ing re­fur­bished goods here. It has also sought ad­di­tional ben­e­fits un­der the Mod­i­fied Spe­cial In­cen­tive Pack­age Scheme (M-SIPS).

An in­ter-min­is­te­rial group in­clud­ing se­nior of­fi­cials of the in­dus­try depart­ment, and the en­vi­ron­ment and IT min­istries along with rev­enue depart­ment of­fi­cials had met Ap­ple’s rep­re­sen­ta­tives in Jan­uary. A fi­nal de­ci­sion is yet to be taken. The gov­ern­ment, how­ever, might find it dif­fi­cult to meet the de­mands amid the roll­out of goods and ser­vices tax (GST) in the com­ing fi­nan­cial year, which sub­sumes all in­di­rect taxes and leaves lit­tle space for of­fer­ing in­cen­tives for par­tic­u­lar sec­tors.

Dif­fer­ent sec­tions of the cen­tral gov­ern­ment though have in­di­cated their ea­ger­ness to bring Ap­ple to In­dia, which would sig­nify a huge leg up for the ‘Make in In­dia’ ini­tia­tive.

State gov­ern­ments too are com­pet­ing with each other to host Ap­ple’s man­u­fac­tur­ing busi­ness.

“Ap­ple wants to make In­dia its third home (in ad­di­tion to US, China) and they want to man­u­fac­ture in Kar­nataka. We want to sup­port them,” Kar­nataka in­dus­tries min­is­ter RV Desh­pande said. He said he had met the Union min­is­ters con­cerned over past three days to push the state’s case.

“They (Ap­ple) would first like to start with as­sem­bly and then go for man­u­fac­tur­ing. There are some is­sues which are pend­ing with the Cen­tre… We have re­quested the Cen­tre to look at it favourably,” Desh­pande said.

Ma­ha­rash­tra, too, has got­ten into the act. On Tues­day, state CM Deven­dra Fad­navis met se­nior of­fi­cials from Fox­conn, Ap­ple’s big­gest con­tract man­u­fac­turer, and of­fered to com­pen­sate for the11.5% im­port duty in case talks with the Cen­tre did not yield a pos­i­tive re­sult.

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