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Apple Set to Start iPhone Production in India

India is expected to be the fastest-growing smartphone market in the world in the next five years. The country had already been anticipated to become the second largest smartphone market in 2017 behind China, overtaking the United States. Global smartphone sales are slated to grow to a record 1.7 billion in 2017, according to research firm Strategy Analytics.

The global smartphone market is still growing at a steady pace due to more widespread adoption in emerging markets. Research service BI Intelligence estimates the global market will hit about 2.1 billion units shipped in 2021.

 

“Just as China's growth is slowing, India is picking up the pace and offering a glimpse of its true potential,” Morgan Stanley's India’s Passage to The Future, an India's investments outlook, wrote.

The challenge

Samsung Electronics, Micromax Informatics, and Lenovo Group led the Indian mobile phone market in 2016 with the South Korean company's share of the market standing at 25.1% in Q2,  according to an IDC Research press release.

Made in India

All the evidence of an emerging glowing India gives Apple enough reasons to make the bold move. 

Despite being the most powerful company in the world, Apple has only 2% of the market in India. One factor may be that iPhones are too expensive to sell in the Indian market.

Starting production by the end of April and establishing a presence in India seems to be part of Apple's efforts to face one of its main challenges to succeed in emerging markets: The high price of its iPhone, which is not in line with more cost-conscious consumers, who are majority in such regions. Today, 80% of smartphones sold in India cost less than $150 with half of them with a price tag of less than $120, according to Bloomberg

Apple expressed their desire to change this by entering the local market. Apple CEO Tim Cook visited India for the first time in May last year where he met with Indian Prime Minister Narendra Modi to discuss Apple's determination to get a bigger share of the market. Cook also met Ravi Shankar Prasad, India's Information Technology minister.

Early this year, Apple executives met Priyank Kharge, Information Technology minister for the state of Karnataka, a state in the south-west of India which capital and largest city is Bangalore, where Apple's iPhones will be made.

Apple committed to do local sourcing, which will contribute to lowering the price of the iPhone for the local market. The company also discussed tax incentives and a permanent relaxation of laws requiring foreign retailers to source 30% of their materials locally.

Apple's offer included the manufacture of iPhones in India for both the domestic market and for exporting. This would represent a potential boost to the ongoing Make in India program designed to create a domestic industrial base and create jobs. 

Apple is also expected to open their own retail stores in India and to do some heavy marketing prior to the openings and launch of the locally made iPhones.

According to Reuters, Prasad said: “We want to make India a big hub of electronics manufacturing.”

Apple has taken up a challenge that might change the course and direction of the future of the electronics manufacturing; in particular, it may signal a change in the future of the global mobile phone market.  

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