PM Narendra Modi has envisioned several plans for India through his ‘Make In India’ push. Apart from many other objectives, he is pursuing a dream of a cheap iPhone in India for a large segment of the Indian populace. A cheap iPhone, for the record; has been a distant reality for maximum Indians due to the high cost of iPhone models in India. This price is attributable to high taxes; the government imposes on iPhone and other imported items.
Though this is not the only reason that iPhone is so pricy in India. The other reasons that make iPhones costly are:
iPhone is fully imported
In India, iPhone is imported in a fully operational condition. This means, unlike other brands, Apple doesn’t assemble their phones here. Compared to an iPhone, a locally fabricated phone in India is exempted from import tax. Also, lesser labour cost in the manufacturing of these mobile handsets plays a big role in slashing the price of the phones. Certainly, the assembly of the iPhone handsets in India would make the iPhone cheaper in India.
Secondly, Apple has an iron grip on the premium mobile segment category. It is the best company for producing high-end premium phones. Unlike other brands, Apple stays aloof from the price wars. Strategically, the iPhone users have been made ‘Price Insensitive’. Price insensitivity is the state of mind of a consumer when he doesn’t mind paying even an unreal price for something to simulate the sensational feeling of exclusivity. Where people are found frantically waiting outside an iPhone store at 4 AM to get a new iPhone, how can an iPhone expected to be cheap?
The IOS and App Store
Whereas other finest phone makers like Samsung, Sony, Oneplus are entirely dependent on Google Android for the operating system requirement of the phone, Apple has its own iPhone operating system (IOS). It has own Applications store also known as IOS. That makes an iPhone unique and Apple doesn’t miss any chance to ride on this advantage.
One Step ahead in innovation
The third reason which doesn’t let iPhone be a cheap phone is that every new iPhone at the time of its launch- is a bundle of innovations and pioneer of new technology. In many ways, they are the industry trendsetter also.
India’s smartphone market: some important facets
As a visionary leader, PM Narendra Modi seems to have many ideas for the fast-growing economy of India. ‘Make In India’ has started to yield many good results in favour of the country where this economic drive is manifesting in attracting the business entities from across the globe.
A fresh initiative from the government
So far, the Indian Prime Minister has played his cards right. Modi has been repeatedly been alerting the Indian business houses for possible foreign investment once the Chinese virus is smothered. The Indian government has recently announced new production-linked incentives (PLI) scheme to encourage local production in the country. Last month, Japan also announced $2.2 billion in monetary support for its business as they are also planning to shift their productions out of China.
Unsaturated market for iPhone
India still is an unsaturated mobile phone market. In India, more than 140 million smartphones were sold in the year 2018, and around 150 million in 2019. Apple sold just 1.7 million handsets in 2018 and 1.6 million in 2019. It is 1.2% of the total smartphone market share in India which is not much impressive from the company’s business perspective. The major share of the smartphone sale in India was captured by Xiaomi and other Chinese giants. This is because, as we already know, the Chinese brands are known for their cheaper models equipped with lots of features.
Blessing in disguise for India
The recent Chinese virus COVID-19 attack has tossed so many questions to MNC’s like Apple for keeping all eggs in a single basket. So many multinational companies have their manufacturing units in China. The COVID-19 has left the policymakers of these MNCs jarred as none expected something happening to them of this scale that the manufacturing plants remained shut for months. These companies are now mulling to relocate some of their manufacturing units out of China. This is a new strategy to face such eventuality where even closure of one location would not impede the manufacturing operations completely.
Moreover, China has a reputation crisis at present as the Chinese are being blamed for the repercussion of hiding the COVID-19 cases until very late. It may turn out to be a blessing in disguise for India where along with a vibrant democracy, cheap labour is easily available.
Manufacturing exodus on cards
So far, China is the major assembly location for iPhone. Last year around the same time there was a piece of news that Foxconn Technology, that iPhone will be produced in India from July 19. Nothing much happened since then.
A new report suggests that Apple might be moving a large part of the iPhone production to India from China. Shifting of Apple’s iPhone manufacturing unit base to India is a strategic decision. This relocation has so many tangible and intangible benefits associated with it. Smartphone production is slowly picking up pace with relaxation of the lockdown in India. Apple’s iPhone manufacturers Wistron and Foxconn have plans to shift 20 percent of production from China to India.
Who are Foxconn
It is not that Foxconn is a new entrant in India. It has been in the country since 2015. Foxconn has already many assembly lines at various locations across India for other brands. Foxconn has two assembly sites in Andhra Pradesh and Tamil Nadu. It makes different parts for Xiaomi and Nokia phones besides a few more brands. In addition to this, its older iPhone production plant is already located in Bengaluru. Foxconn was ready to start trial production of the latest iPhones in the country by July 19. Only after that, it was to start full-scale assembly at its factory outside of Chennai.
A rosy picture for Apple
India, as a big market for almost anything, projects a big picture for any multinational company to tap into for ample opportunities. Apple, as a premium mobile handset manufacturer also has a lot to get benefitted out of it. Apple is looking to scale up its revenue to $40 billion in India over the next five years which is around 20% of its production. Some of the salient facts which can bring a cheap iPhone for every Indian are right here:
Fast-rising medium class
India has become the fastest-growing smartphone market in the world. There is something for every mobile manufacturer here as living standards in India varies drastically. India has a considerable size of the high-income group including Asia’s wealthiest person from the country. In contrast, a significant percentage of the population of India lives on a lower and meagre income. India has a very strong medium-class presence.
The huge population makes the country ideal for the availability of broad consumer segments. Having said that, there is a market for every phone model.
India is the fastest-growing major economy in the world at the moment. With the growing economy, the purchasing power of the people has improved significantly. Hence, more people can afford the cost of a high-end phone like the iPhone now. Low cost Chinese mobile handsets have outsmarted Apple’s iPhones in a big way so far. For example, at the time of its launch, Xiaomi’s sold its then flagship Note 7 for 9,999 rupees ($143) – a 10th the price of Apple’s iPhone X in India. Clearly, not many people in India can afford this luxury.
China is no more heaven
In terms of handset manufacturing, the cost in China is nearly 3 times the assembly cost of an iPhone in India. China is no more so cheap for any MNC now.
Apple is losing fast to local competition to Huawei and Xiaomi in high-end smartphones in China.
Chinese markets are almost saturated and competition is high now.
Apple has a very high brand appeal and this should help the company as well as consumers in a big way. No Chinese brands stand close to Apple in terms of brand appeal – a strength Apple would definitely like to encash in India.
Shifting the assembly lines to India will fetch Apple a saving of around 20% import duty. This will still leave a high-profit margin for the company despite cost reduction from the company for Indian consumers.
India as a long term strategic location
One big reason is that even though India is still an emerging smartphone market, it has a lot of potentials for export also. It can serve as an export hub for the south-eastern Asiatic region. These economies and markets are very lucrative and growing like India.
Locating more production in India would help diversify Apple and Foxconn’s manufacturing footprint away from China. It will compensate for the effect of ongoing trade tension between China and the U.S.
A huge market awaits for cheap iPhones
Smartphone production is slowly picking up pace with relaxation of the Covid-19 lockdown in India. To sell a relatively cheap iPhone in India, Apple is going to open its stores across the country. The company is already producing some older models of phones locally and it would also help Apple’s retail push in India.
With manufacturing plants in India, the cost of the iPhone will reduce significantly. This will increase the affordability of the iPhone for the Indian consumers. The iPhone 12 is due for release in September 2020. Hope that should improve the company’s figures also. Top of Form At present, Apple is shifting its 20% capacity of production in India and will use this facility exclusively for export. Despite that, a cheap iPhone in India is doesn’t seem very far.