India hikes import tax on cellphones, liable to hit Apple's iPhone hardest

Posted:
in iPhone
The Indian government is raising import taxes on cellphones from 10 to 15 percent, which could put pressure on Apple to accelerate local iPhone manufacturing.




The shift comes as part of a general hike on import taxes, including a similar increase on video cameras and a TV tax doubled to 20 percent, Reuters reported. Indian Prime Minister Narendra Modi has championed a "Make in India" program designed to spur local manufacturing.

Conterpoint Research notes that while 8 out of 10 phones sold in India this year were made locally, about 88 percent of Apple's iPhones are imported, since only the SE is assembled in the country. Most of company's assembly work happens in China.

Apple is likely to raise prices on iPhones to compensate -- a serious matter, given that even the SE is too expensive for most Indians. Over 75 percent of smartphones sold in the country cost less than $250, and the iPhone has a marginal share of the local market.

The company has pursued a variety of concessions and financial handouts in exchange for growing local manufacturing. The Indian government, though, has allegedly held fast and refused to offer Apple anything unavailable to other multinational businesses.

Apple is rumored to be working on an "iPhone SE 2,", which could be assembled in India like its predecessor. The device could ship in the first half of next year, and include upgrades like an A10 Fusion processor and a 1,700 milliamp-hour battery, but will probably forego features like wireless charging and the iPhone X's Face ID.
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Comments

  • Reply 1 of 46
    If rumors are true, Apple is going to get hit even harder because India is in the process of raising taxes on imported components as well.  That would, again, affect Apple more than others since Apple only assembles in India.  They don't manufacture.  Somebody at Apple is going to have to make some hard decisions regarding whether or not India is worth the effort.  Apple is in a strange place regarding India.  They are so used to negotiating from a position of strength, and with India, that is definitely not the case.
  • Reply 2 of 46
    Apple should consider opening their factories in a tax-free zone like Dubai. They have no shortage of Indian labor and many will be willing to migrate for the opportunity.

    It's crazy enough that it might just work!
  • Reply 3 of 46
    ben20ben20 Posts: 126member
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
  • Reply 4 of 46
    gatorguygatorguy Posts: 23,165member
    Apple should consider opening their factories in a tax-free zone like Dubai. They have no shortage of Indian labor and many will be willing to migrate for the opportunity.

    It's crazy enough that it might just work!
    Aren't they already assembling and shipping in Chinese low-tax / tax-free zones? 
    edited December 2017 anantksundaram
  • Reply 5 of 46
    Apple should consider opening their factories in a tax-free zone like Dubai. They have no shortage of Indian labor and many will be willing to migrate for the opportunity.

    It's crazy enough that it might just work!
    How would that help them get a better foothold in the Indian market?  Manufacturing in Dubai does nothing for Apple.  
  • Reply 6 of 46
    gatorguygatorguy Posts: 23,165member
    Apple should consider opening their factories in a tax-free zone like Dubai. They have no shortage of Indian labor and many will be willing to migrate for the opportunity.

    It's crazy enough that it might just work!
    How would that help them get a better foothold in the Indian market?  Manufacturing in Dubai does nothing for Apple.  
    Doh! That's a far better point than mine. Spot on sir, the iPhones would still be imported products.
  • Reply 7 of 46
    ksecksec Posts: 1,567member
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    bloggerblognhtchiaentropys
  • Reply 8 of 46
    India is too proud to allow Apple to sell refurbished iPhones in their country which seems kind of stupid (to me). I think that move hurt Indian consumers who wanted to buy iPhones. I don't get it. Refurbished iPhones are nearly as good as new and don't cost as much. I don't have a problem buying refurbished Apple products and I live in the U.S. It doesn't hurt my pride at all.

    It appears Apple will just have to put factories in India to get the tax break even though hardly anyone in India is going to buy iPhones. India is the land of Android smartphones and nothing is going to change that. It doesn't seem as though Apple is going to make any decent amount of money from Indian consumers, so it's all a waste of time and effort. Apple is just going through the motions to not ignore India. I'm not knocking India. It's just that they're not economically caught up with many other nations. Consumers should buy what they can afford and Android smartphones are basically what most Indian consumers can afford.
    edited December 2017
  • Reply 9 of 46
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    Yup, zero incentive for Apple in a country of consumers buying only Android smartphones.  Apple still has to put up a front showing they care about Indian consumers.  I guess no company wants to turn their back on somewhat potential customers.  Apple can easily afford to keep a bridge to consumers in India.
  • Reply 10 of 46
    asdasdasdasd Posts: 5,668member
    If rumors are true, Apple is going to get hit even harder because India is in the process of raising taxes on imported components as well.  That would, again, affect Apple more than others since Apple only assembles in India.  They don't manufacture.  Somebody at Apple is going to have to make some hard decisions regarding whether or not India is worth the effort.  Apple is in a strange place regarding India.  They are so used to negotiating from a position of strength, and with India, that is definitely not the case.
    Why not lobby the US government for protectionism. I dont agree with Trump on much but it is odd to have one way protectionism. Although he concentrates on China.  
    joaonimguem
  • Reply 11 of 46
    asdasdasdasd Posts: 5,668member
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    Yup, zero incentive for Apple in a country of consumers buying only Android smartphones.  Apple still has to put up a front showing they care about Indian consumers.  I guess no company wants to turn their back on somewhat potential customers.  Apple can easily afford to keep a bridge to consumers in India.
    There is probably no way to replicate the entire supply chain in India. Apple would need Indian suppliers for every single component. An Indian gorilla glass, a chip maker, a GPS manufaturer and on and on. And on. There are dozens of them. Indian either has this expertise, or it doesnt and I dont see it. Even if it did have this expertise, the iPhones that are manufactured in India would have to have as many suppliers as the ones manufatured externally, doubling the supply chain. 

    Apple cant win this, it just has to pull out. 
  • Reply 12 of 46
    asdasdasdasd Posts: 5,668member

    India is too proud to allow Apple to sell refurbished iPhones in their country which seems kind of stupid (to me). I think that move hurt Indian consumers who wanted to buy iPhones. I don't get it. Refurbished iPhones are nearly as good as new and don't cost as much. I don't have a problem buying refurbished Apple products and I live in the U.S. It doesn't hurt my pride at all.

    It appears Apple will just have to put factories in India to get the tax break even though hardly anyone in India is going to buy iPhones. India is the land of Android smartphones and nothing is going to change that. It doesn't seem as though Apple is going to make any decent amount of money from Indian consumers, so it's all a waste of time and effort. Apple is just going through the motions to not ignore India. I'm not knocking India. It's just that they're not economically caught up with many other nations. Consumers should buy what they can afford and Android smartphones are basically what most Indian consumers can afford.
    Remember that Android iPhones are also going to go up in price. Not just the import tax but the component tax, if any are being made in India. 

    The idea is to replicate the Chinese or broader asian supply chain for smart phones in one country. Cant see that working. If it starts to work then Apple can fish in that supply chain but it can do nothing now. 
  • Reply 13 of 46
    spice-boyspice-boy Posts: 1,439member
    Didn't you all vote for a candidate that boast about making the "best deal" for our country yet when another country actually does this you all complain. 

    anantksundaramsingularity
  • Reply 14 of 46
    Apple should consider opening their factories in a tax-free zone like Dubai. They have no shortage of Indian labor and many will be willing to migrate for the opportunity.

    It's crazy enough that it might just work!
    How would that help them get a better foothold in the Indian market?  Manufacturing in Dubai does nothing for Apple.  
    Because with their tax hike the with-tax and without-tax difference would make the price for the customer similar enough. Besides, in places like Dubai everything is tax free including labor, their shipping ports and even their import/export; add it all up it might be a better bet.
  • Reply 15 of 46
    avon b7avon b7 Posts: 5,901member
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    I don't know the Indian market but if 'made in India is important for consumers it could be worthwhile setting up shop there. Of course it's a win/win for government as competitors are already manufacturing there to a certain degree under the 'make in India' banner so it's not like there is a shortage of mobile options.

    Apple's main problem seems to be price. They have nothing 'new' and priced for that market. It looks like the most attractive options are the SE, 6 and possibly 7 but if they have to up the price on the 6 and 7 they will be older and more expensive phones having to compete with the likes of Honor who already manufacture some models in India.

    If Apple can somehow make manufacturing cheaper or on a par with China then that's a different story as they could use those phones in other markets and gain protection from political or geological instability.
    edited December 2017
  • Reply 16 of 46
    asdasdasdasd Posts: 5,668member
    spice-boy said:
    Didn't you all vote for a candidate that boast about making the "best deal" for our country yet when another country actually does this you all complain. 

    Except Trump really hasnt done it. 
  • Reply 17 of 46
    gatorguygatorguy Posts: 23,165member
    asdasd said:
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    Yup, zero incentive for Apple in a country of consumers buying only Android smartphones.  Apple still has to put up a front showing they care about Indian consumers.  I guess no company wants to turn their back on somewhat potential customers.  Apple can easily afford to keep a bridge to consumers in India.
    There is probably no way to replicate the entire supply chain in India. Apple would need Indian suppliers for every single component. An Indian gorilla glass, a chip maker, a GPS manufaturer and on and on. And on. There are dozens of them. Indian either has this expertise, or it doesnt and I dont see it. Even if it did have this expertise, the iPhones that are manufactured in India would have to have as many suppliers as the ones manufatured externally, doubling the supply chain. 

    Apple cant win this, it just has to pull out. 
    Apple seems to believe differently tho, Cook pointedly talking up the India market to analysts in the past several earnings and conference calls and claiming to be "very, very bullish and very, very optimistic about India." as recently as August.
    https://www.gadgetsnow.com/tech-news/heres-what-apple-ceo-tim-cook-said-about-india-during-the-companys-earnings-call/articleshow/59879559.cms

    edited December 2017
  • Reply 18 of 46
    asdasdasdasd Posts: 5,668member
    gatorguy said:
    asdasd said:
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    Yup, zero incentive for Apple in a country of consumers buying only Android smartphones.  Apple still has to put up a front showing they care about Indian consumers.  I guess no company wants to turn their back on somewhat potential customers.  Apple can easily afford to keep a bridge to consumers in India.
    There is probably no way to replicate the entire supply chain in India. Apple would need Indian suppliers for every single component. An Indian gorilla glass, a chip maker, a GPS manufaturer and on and on. And on. There are dozens of them. Indian either has this expertise, or it doesnt and I dont see it. Even if it did have this expertise, the iPhones that are manufactured in India would have to have as many suppliers as the ones manufatured externally, doubling the supply chain. 

    Apple cant win this, it just has to pull out. 
    Apple seems to believe differently tho, pointedly talking up the India market to analysts in earnings and conference calls.

    That was before the recent tax increases though, and I think they assumed that they were going to get concessions. 

    Heres a list of Apple suppliers. 

    https://images.apple.com/supplier-responsibility/pdf/Apple-Supplier-List.pdf

    It doesnt look like China expects phones to be both assembled and components sourced in China. At least I am not aware of any tax on supplier imports. 
  • Reply 19 of 46
    asdasdasdasd Posts: 5,668member
    India seems to want a cut of that supplier cake,  and you can see that the western companies often have offices in China and their own countries. I notice thought that fiarly high waged Asian countries dont. Samsung, Alps etc. 

    So this is chicken and egg. If most of those suppliers opened plants in India, Apple could assemble its Indian line (or general line) of iPhones from the same suppliers. However they probaly wont set up there unless Apple or other companies push them. 

    Edit:

    Actually Samsung do have a Chinese plant. 
    edited December 2017
  • Reply 20 of 46
    gatorguygatorguy Posts: 23,165member
    asdasd said:
    gatorguy said:
    asdasd said:
    ksec said:
    ben20 said:
    Apple can manufacture in India instead of begging for concessions and financial handouts. Made in India. Creating jobs, that's a good thing to do in India!
    Why would a company decide to manufacture in a place when it offer zero incentive, and has nothing better then its current location of manufacture, and then India decide to also hike import tax on component.

    In that case it only make sense for Apple to pay the Import tax and do nothing with India.   

     
    Yup, zero incentive for Apple in a country of consumers buying only Android smartphones.  Apple still has to put up a front showing they care about Indian consumers.  I guess no company wants to turn their back on somewhat potential customers.  Apple can easily afford to keep a bridge to consumers in India.
    There is probably no way to replicate the entire supply chain in India. Apple would need Indian suppliers for every single component. An Indian gorilla glass, a chip maker, a GPS manufaturer and on and on. And on. There are dozens of them. Indian either has this expertise, or it doesnt and I dont see it. Even if it did have this expertise, the iPhones that are manufactured in India would have to have as many suppliers as the ones manufatured externally, doubling the supply chain. 

    Apple cant win this, it just has to pull out. 
    Apple seems to believe differently tho, pointedly talking up the India market to analysts in earnings and conference calls.

    That was before the recent tax increases though, and I think they assumed that they were going to get concessions. 

    Heres a list of Apple suppliers. 

    https://images.apple.com/supplier-responsibility/pdf/Apple-Supplier-List.pdf

    It doesnt look like China expects phones to be both assembled and components sourced in China. At least I am not aware of any tax on supplier imports. 
    Regarding the import duty on components India already rolled back from nearly 30% to just over 12% this past year in order to appease smartphone manufacturers already operating there. I wouldn't expect them to cut further into those taxes just to make Apple happy. Other OEM's have found it sensical to open factories to either build or at least assemble product in order to profit from the India marketplace even with component import duties in place.
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