Apple Will Soon Be Making iPhones in India

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2Q 2017 | IN-4587

Apple recently announced its plans to use Taiwanese contract manufacturer Wistron to assemble up to 400,000 units of its iPhone SE each year in Karnataka, Southern India. Apple hopes to make India its third-largest manufacturing center, after China and Brazil.

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Manufacturing in India


Apple recently announced its plans to use Taiwanese contract manufacturer Wistron to assemble up to 400,000 units of its iPhone SE each year in Karnataka, Southern India. Apple hopes to make India its third-largest manufacturing center, after China and Brazil.    

Make in India Initiative


The “Make in India” campaign was launched by the Indian government in 2014 to encourage Foreign Direct Investment (FDI) in India by Multi-National Corporations (MNCs), as well as to encourage domestic companies to grow their presence and domestic reach in India. In 2015, total FDI exceeded US$60 billion, placing India among the top 10 global investment destinations. In order to make it easier to do business, India cut back on bureaucratic controls while offering a range of incentives, including concessions on tax and custom duties, to ensure conditions are conducive to FDI. Apple’s decision to establish a manufacturing presence in India has been propelled by this initiative. 



Today, Apple’s share in the total Indian smartphone market remains below 5%. India is the fastest growing smartphone market in the world and although smartphone penetration is currently below 30% at 275 million units, this is expected to more than double to at least 60% by 2020 with nearly 400 million new smartphone additions between 2017 and 2020, according to GSMA projections. Demand conditions are, therefore, favorable with strong market growth envisaged moving forward. Given that Apple has a very small market share, it is very ambitious in its growth plans, hoping to boost its share by producing and selling more of the competitively priced iPhone SE models in India. The phone is expected to target the sweet spot in the mid-price segment of the market in the INR 20,000 (US$300) range. This segment has grown exponentially in recent years. 

India offers 20% capital subsidy on electronic manufacturing for 10 years under the Modified Special Incentive Package Scheme. However, Apple asked the government for exemption on custom duties for components, consumables, and other equipment for 15 years, and this request is yet to be approved. These incentives may help to lower the production cost of the iPhone SE, enabling Apple to price it lower to boost sales in the targeted segment while maintaining its profit margin. Subsequently, Apple plans to add other India-made models to gain more traction in the premium segment (over INR 30,000/US$450), where there is strong competition from Samsung with its recent launch of the S8/S8 plus. Based on 1Q 2017 sales in the Indian premium segment, Apple’s market share stood at 43% compared to Samsung’s share of 48%, down from 62% and up from 31% Q-o-Q respectively. This underscores the need for Apple to lower its production costs and to price more competitively to boost sales.

India offers Apple an abundant supply of skilled technical resources, costing potentially less than their Chinese counterparts on average. Moreover, Apple has the option of scaling up its manufacturing as it deems necessary, as India produces high-quality engineering graduates that can be recruited and trained to perform in various assembly roles. Moreover, from a global strategy and risk management angle, manufacturing in India is a key consideration for Apple. Having production centers in different countries helps to diversify away country-specific risk and proves very useful in global supply chain risk management. This is especially true from a business continuity planning perspective, where in the event of a shutdown or reduction in output at one manufacturing location, Apple may be able to make up the shortfall in an alternate location, assuming spare production capacity is available. This is a key source of competitive advantage.

Although Apple is expected to initially source and import components and consumables from its established supplier network, there will be an opportunity for potential domestic suppliers that meet price and quality standards to be enlisted by Apple at a later date. Manufacturing in India is a precursor to setting up its own retail stores and to boost channel partners to augment distribution capabilities, once again giving local players the opportunity to forge partnerships across the value chain in sales, service, and support services.

Even if some of the desired incentives are denied by the Indian government, Apple’s decision to establish a manufacturing presence in a promising market where incomes/purchasing power and technology adoption are rising, is a great strategic choice. Time to market (TTM) and cost of production are both expected to decrease for the selected models. Ample skilled human resources are available and business continuity planning readiness is heightened. There is scope for enlistment of both new suppliers and channel partners, in addition to job creation with Apple’s own retail stores. Overall, Apple may reap the rewards of this decision in the near future, with more traction across both mid and premium segments gained from cost/pricing advantages of producing in India. Leveraging the support of a pro-investment government and its own global brand identity, which Indian consumers are increasingly keen to possess, Apple should be able to strengthen its foothold in India moving forward.


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