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Apple iPhone

Apple Set to Begin Making iPhones in India by April's End

Feb. 3, 2017
The start of iPhone assembly signals a renewed focus on India, where Apple just scrapes into the top 10, as growth begins to slow in China and other more mature markets.

Apple Inc. will begin assembling iPhones in India by the end of April, a regional minister says, heightening its focus on the world’s fastest-growing major smartphone market as growth slows elsewhere.

The U.S. company has tapped Taiwan’s Wistron Corp. to put together its phones in the tech capital of Bangalore in Karnataka, said Priyank Kharge, the state’s information technology minister. Apple (IW 500/2) executives met with him in January and confirmed the timeline, he said in an interview.

The start of iPhone assembly in India comes after months of speculation on Apple’s plan for the market, which is led by rival Samsung Electronics Co. It signals a renewed focus on the country, where it just scrapes into the top 10, as growth begins to slow in China and other more mature markets. The Cupertino, Calif.-based company is said to have put forward a long list of demands in negotiations with India’s federal government, including a 15-year tax holiday to import components and equipment.

“Apple’s iPhones will be made in Bangalore and all devices will be targeted at the domestic market,” said Kharge, IT minister for Karnataka, of which Bangalore is the capital. Kharge said the state will help Apple if it decides to turn to other contract manufacturers in the region. “We did not discuss any other incentives,” he said.

Chief Executive Officer Tim Cook said on an earnings call this week that India is “the place to be.” He visited the country for the first time last May as he sought government approval for Apple to open its own stores -- a step the company deems critical to growing the iPhone user base across the country. Over the long run however, Apple needs to meet requirements that single-brand retailers source 30% of components from within India. Manufacturing locally will help with that.

Making iPhones locally could also score brownie points with the national government. Prime Minister Narendra Modi wants companies to make products in the country as part of his “Make in India” policy, aimed at reaping the benefits that come from manufacturing facilities and jobs.

The company shipped 2.5 million iPhones into the country in 2016. While that was its best year ever in terms of revenues and sales, it only ranked 10th among vendors in the December quarter according to Counterpoint Research. Apple accounts for less than 2% of shipments in India, where an estimated 750 million smartphones will be sold by 2020.

While Indian consumers currently buy mainly cheaper devices made by Samsung and Chinese brands such as Oppo, Apple believes rising incomes will make the premium-priced iPhone more attractive over time.

Apple doesn’t manufacture devices itself, but rather partners with contract manufacturers to handle the capital intensive demands of building factories and hiring staff. Its Indian phones will be assembled through a plant on Bangalore’s outskirts operated by Wistron, a Taiwanese contract manufacturer, bypassing usual partners such as Hon Hai Precision Industry Ltd. Hon Hai, the main listed arm of Taiwan’s Foxconn Technology Group, is said to be an option in future.

“In the longer term, it’s a great move,” Cook said on this week’s post-earnings call. “We are in discussions on a number of things, including retail stores, and fully intend to invest significantly in the country.”

By Saritha Rai

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Licensed content from Bloomberg, copyright 2016.

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