Apple asks Foxconn to explore making iPhones in India

Will Apple make iPhones in India? That’s what Prime Minister Narendra Modi is said to have asked Tim Cook when they met earlier this year, but the Apple chief executive officer seemed to be reluctant to make a commitment.
He might be reconsidering. Apple has sounded out one of its largest contract manufacturing partners,Foxconn Technology Group, to look at the possibility of making the iPhone in India in the next two to three years, according to two people with knowledge of the matter.
“There’s definitely interest,” said one of the two cited above. “When Tim Cook was here, the government raised the issue of making in India. It is after that that Apple started thinking of doing something in India which is long term.”
Move to make devices cheaper
Local manufacturing would allow Apple to bring products to market quicker besides making them cheaper for Indian consumers and turning the country into an export hub, analysts said, while adding that this would require creating an elaborate and complex supply chain.
On his first visit to the country in May, Cook and Modi are said to have discussed manufacturing and retailing in India. Cook announced the setting up of an app development unit in Bengaluru and opened a development centre for Apple Maps in Hyderabad, with an investment of $25 million.
Apple wants to open wholly-owned stores in the country, which Cook sees as integral to winning customers by setting new service standards.
The second person aware of the details said Foxconn may take two to three years to begin making iPhones locally, the first step being assembling them in India. No timeline has been discussed, he said.
Apple, expected to launch the iPhone 7 on September 7, declined to comment, as did Foxconn. “Foxconn follows a strict company policy of not commenting on any matters related to current or potential customers, or any of their products,” a Foxconn Technology Group spokesperson said in response to ET’s query.
Need to boost India sales
Apple badly needs to boost sales in the world’s fastest-growing smartphone market at a time US and China are slowing.
In recent years, Cook has repeatedly spoken of India as being a market where Apple sees great potential. “India is fast-growing, but our base there is smaller,” Cook told the Washington Post in an interview last month.
“One of the big things that has held India back is the cellular infrastructure. They have two major carriers putting in a lot of investment to bring 4G.”
The launch of 4G services by Reliance Jio Infocomm on Monday is expected to launch a new wave of demand for 4G devices but pricing will be critical in a market that’s the second-largest after China in terms of the smartphone user base.
Another reason to go local is that India has started offering differential duty structures for companies making phones in the country, which means such devices will be cheaper than imports. “Tax benefit will remain one of the key drivers for setting up new base in India,” said Anshul Gupta, research director at Gartner.
“Going forward, their volumes will also grow. The investment (they make) will get justified by the local consumption. They could possibly look at exporting to nearby markets… They’re totally go-to-market centric with a single team looking at iPhones, iPad and Mac, so going local will only help them further.”
Many challenges
However, making phones locally would come with certain challenges. Compared with indigenous brands manufacturing in India, Apple’s plans would entail far higher investments, cutting-edge technology required for making the high-end smartphones and a component ecosystem that is currently far more developed in China.

While local brands operate at volumes running into millions, Apple would operate at multiple times that scale as it would look at catering to multiple countries from India, not just the local market, said Vishal Tripathi, research director at Gartner India.

In the overall market, however, it has about a 2 per cent share, which pales in comparison with leader Samsung’s 25.6 per cent share. In the past two quarters — January to June — 1.3 million units were shipped to India, 75 per cent higher than a year earlier.

 Sales of iPhones in India rose 76 per cent in the quarter ended March, faster than most of its key markets, while revenue from local operations rose 38 per cent.

With Apple’s growing popularity in India, there’s speculation that it may reduce the lag between launch and sales start of the iPhone 7 in India, having shortened it last year for the 6s as well.

Apple had a 47 per cent share of the premium market segment — Rs 30,000 and up — in the quarter ended June, marginally trailing market leader Samsung, which had a 49 per cent share by volume, according to Counterpoint Research.