In a move poised to take the electronic manufacturing in India to the next level, the Ministry of Electronics and Information Technology has approved contract manufacturer Wistron’s Rs 5,091-crore plan to make high-end Apple devices in the country.
IT minister Ravi Shankar Prasad told Economic Times the Wistron’s application is now with the cabinet and the company would soon make the latest iPhone models in India. Taiwan-based manufacturing giant Foxconn has also submitted an application for a Rs 2,500-crore project on December 31, he added.
The news comes after the US has touched off a trade war with India by ending the preferential trade terms between both countries. The US used to allow duty-free entry of exports worth USD 5.6 billion from India.
The move will help the California-headquartered company to steady its falling market in Asia’s two largest economies, China and India.
iPhone shipments in China, Apple’s third-largest market in terms of revenue, slid from 50 million in 2017 to 44 million in 2018, showed data by Counterpoint Research. Apple’s China revenue shrunk by 27% in the fourth quarter of 2018.
In India, Apple's shipments declined to 1.7 million in 2018 from 3.2 million a year earlier, slashing its market share to 1.2% from 2.4%, as per Counterpoint Research.
Apple’s sales in India have been focused on lower-end phones. iPhone models released before iPhone8 accounted for more than half of its sales, said a Hindu Business Line (HBL) report, quoting the Counterpoint research. “Apple has been sharply losing its market share in India, especially after last year when it launched products which were perceived to be overpriced,” said Dr Jaijit Bhattacharya, president, Centre for Digital Economy Policy Research.
“The only way to counter that was to manufacture in India. And given that the volumes were significantly high in India, it made sense. Also in tandem, the government had increased duties on smartphones, which made Apple even more expensive than everywhere else.”
The Indian government started slapping custom duties on smartphones in mid-2017. In the next one and half years, government levied a 10% tax on the imported smartphone components.
“The decision by Indian government to put import duties on smartphones is what eventually led to Apple manufacturing in India," said Bhattacharya.
At the same time, China has been providing additional incentives to maintain its place as the leader in electronics manufacturing. But the government isn’t too worried about that, Prasad said.
Vietnam has also emerged as a manufacturing hub in the recent years, attracting multinationals like Samsung and Intel. For instance, Samsung stopped the production of television sets in India and relocated its manufacturing unit to Vietnam due to increased duties on TV components.
Earlier this week, an Economic Times report said the government has sought a commitment from Samsung to bring back production of TVs to India if duty on open cells was removed.
Apart from Vietnam, Southeast Asian countries such as Taiwan, Malaysia and Thailand possess competent manufacturing facilities.
“Given the size of India market, companies are increasingly looking at India as a hub for their manufacturing operations," Bhattacharya said.
The government has received 419 projects worth Rs. 1,13,089 crore till December 31, 2018 under modified incentive package scheme (M-SIPS) which provides a capital subsidy of up to 25% to electronic companies located in non-SEZ areas, and 20% to those in SEZ areas. Of the total, India has given a nod to 197 applications with the proposed investment of Rs. 41,791 crore.
According to the new National Policy on Electronics, published in February last week, the objective is to promote domestic manufacturing and exports in the entire value-chain of ESDN (Electronic System Design) to achieve a turnover of USD 400 billion by 2025. The policy endorses production of 1 billion mobile handsets by 2025 (worth USD 190 billion) including 600 million mobile handsets (worth USD 110 billion) earmarked for exports.
Both Taiwanese contract manufacturers have been working on a plan to produce high-end Apple phones in India. Wistron, at present, assembles lower-cost SE and 6S models in India and is likely to begin manufacturing iPhone 8 in the country, as per media reports.
Foxconn, on its part, plans to begin assembling top-end iPhones in India at its Sriperumbudur plant in 2019, a report in HBL said.