Business Standard: February 06, 2017
Bengaluru, New Delhi: Apple is looking to produce lower-cost iPhone SE at its upcoming facility in Bengaluru as it looks to gain a price advantage in the market in which it has been a fringe player so far.
While the plant in Bengaluru, owned by partner Wistron, is already being upgraded to support assembly of Apple’s iPhones, the Cupertino company continues to engage in talks with the central government over full-scale manufacturing of its flagship devices in the country.
For this, Apple is seeking a 15-year tax exemption from the government to make India a hub for exporting the devices rather than just producing devices for the local market, according to officials at the commerce ministry. Apple is facing a challenge of rising input costs in China, apart from the government increasingly cracking down on foreign companies.
Wistron, which will assemble iPhones in Bengaluru, is one among the few original design manufacturers Apple employs to build its iPhones. The company has previously won contracts abroad to manufacture lower-cost iPhone 5c, 5s, and SE devices, while larger partners such as Foxconn have handled production of flagship iPhone models.
“Wistron manufactures low-cost devices for Apple, the iPhone 5c, 5s, and SE. So the chances are high that only those are going to be manufactured at first. It also makes sense for them to save that extra 12.5 per cent on low-cost devices where margins are slim,” said Neil Shah, partner at Counterpoint Research.
The iPhone SE, which was launched in March 2016, was seen as Apple’s weapon to win in emerging markets. However, the device saw slow sales in India after being priced close to Rs 40,000, a market where seven out of 10 smartphones sold cost less than Rs 10,000.
"Winston has begun upgrading infrastructure at the Peenya location, indicating Apple is keen to make iPhones here. An agreement is yet to be signed," a government official said. "More details will emerge once Apple's talks with the central government are over."
In a statement on Thursday, the Karnataka information technology minister said that Apple representatives had met the state’s ministers and officials on manufacturing devices here. Apple’s delegation was led by Priya Balasubramaniam, vice-president of iPhone operations.
“Our pitch to Apple was that they have the entire ecosystem ready here in Bengaluru. No other place in India can offer the pool of hi-tech talent, researchers and app developers,” said minister Priyank Kharge in a telephonic interview.
Currently, Apple controls just three per cent of the 100-million-plus smartphone market in India.
In the quarter that ended December, Apple said it had posted record revenue in the country despite a slowdown in consumption due to demonetisation. In the September quarter, the company had said sales of its iPhones grew 50 per cent in the 12-month period, signalling a positive environment.
Apple continues a two-pronged attack in India, wooing customers with its latest iPhones and simultaneously pushing older models at more affordable costs.
Nearly 45 per cent of Apple’s iPhone sales continue to come from models like the iPhone 5s that cost under Rs 20,000 on popular online retail channels in the country.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.