India loosens 30 percent sourcing requirement on sale goods, paving the way for Apple Stor...
The India government has loosened up -- but not eliminated -- a 30 percent rule that was putting a damper on Apple's plans to open up retails stores in the country.
On Monday, the India government has modified its taxation and sourcing laws that allow "single-brand retailers" that are foreign owned to temporarily meet a 30 percent sourcing requirement by buying goods made in India and selling them in other countries. The waiver is for five years, at which point, the company would be required to source 30 percent of its goods sold in retail stores from within the country.
Apple has been seeking a rule change for over a year, as it has expanded its operations and assemblies in India.
Opinion in the country about the changes vary, according to the New York Times. Business advocates call it "dramatic relief" for international corporations, with concern from India trading groups that multinationals will squeeze out local businesses unfairly.
Manufacturing the iPhone SE and possibly other devices in the future with expansion in India goes some way towards fulfilling a number of conditions imposed on Apple as a condition of doing business, along with providing tax breaks.
Assembly of the iPhone SE at the Karnataka Wistron facility began in mid-May 2017. Officials in the Indian government hope the price for the iPhone SE will be cut in time by as much as $100 compared to the current local price, though Apple is likely to try and avoid too much of a reduction in order to preserve its margins.
The first iPhone SE models built in India by Wistron went on sale in various cities around India in June 2016. The devices are marked "Designed by Apple in California, Assembled in India."
As far as sales channels are concerned, Apple is considering flagship stores in New Delhi, Bangalore, and Mumbai -- all three locations where most of India consumers wealth is centered. This is in addition to the Apple Authorized Reseller expansion that Apple was said to be examining in March.
In response to a question at the most recent Apple earnings conference call, Apple CEO Tim Cook said that there was "great momentum" in India, but Apple was still "gaining understanding" of the market.
On Monday, the India government has modified its taxation and sourcing laws that allow "single-brand retailers" that are foreign owned to temporarily meet a 30 percent sourcing requirement by buying goods made in India and selling them in other countries. The waiver is for five years, at which point, the company would be required to source 30 percent of its goods sold in retail stores from within the country.
Apple has been seeking a rule change for over a year, as it has expanded its operations and assemblies in India.
Opinion in the country about the changes vary, according to the New York Times. Business advocates call it "dramatic relief" for international corporations, with concern from India trading groups that multinationals will squeeze out local businesses unfairly.
Manufacturing the iPhone SE and possibly other devices in the future with expansion in India goes some way towards fulfilling a number of conditions imposed on Apple as a condition of doing business, along with providing tax breaks.
Assembly of the iPhone SE at the Karnataka Wistron facility began in mid-May 2017. Officials in the Indian government hope the price for the iPhone SE will be cut in time by as much as $100 compared to the current local price, though Apple is likely to try and avoid too much of a reduction in order to preserve its margins.
The first iPhone SE models built in India by Wistron went on sale in various cities around India in June 2016. The devices are marked "Designed by Apple in California, Assembled in India."
As far as sales channels are concerned, Apple is considering flagship stores in New Delhi, Bangalore, and Mumbai -- all three locations where most of India consumers wealth is centered. This is in addition to the Apple Authorized Reseller expansion that Apple was said to be examining in March.
In response to a question at the most recent Apple earnings conference call, Apple CEO Tim Cook said that there was "great momentum" in India, but Apple was still "gaining understanding" of the market.
Comments
I have very little trust and faith in the Indian government. What they want is 5 years from now Apple will have some of its manufacturing ecosystem in India.
But simply looking at how they deal with all these request, and how little understanding they have, and how unwillingly admit what problem and wrongs they have as a country. I can only see Apple bringing in the lowest, poorest, simplest form of manufacturing to India.
Then in five years time they will ask the stupid question why iPhone XV still isn't manufactured in India and be very unhappy with it.
What the government did was not for Apple. It was a policy change that also ended up helping Apple. There was no indication it was motivated by Apple's request in any way. The policy shows an understanding of the troubles a multinational might face in the initial years, and so that part of it has been eased by allowing an offset mechanism. The policy as such still stays.
You might not like it, but the fact remains that the indian economy has been one of the strongest performing economies in the world since the late 90s, and even as economies around the world were crashing in 2008, there was minimal impact on it. Sure, china might have done a lot more in a much shorter time, but being second to china is nothing to be ashamed about. (I am not even getting into the fundamental weaknesses in the china story).
Apple not having a proper presence in the second largest smartphone market in the world (US is third) is just silly, and it is more apple's loss than india's.
The iPhone SE & 32GB 6 is a good product line for India right now.
Apple products have not been able to be sold properly in India because of all sort of red tape and huge excise taxes.
The top 15% of the Indian population (180M) is a good a target as going after Brazil, Russian, the whole eastern bloc and the middle east.
(the number of clientele with money to buy an Iphone is probably bigger in India than in Russia or Brazil).
Considering the economic growth over the last 20 years, not hitting that market would be a bit crazy.
I'm betting Apple knows more about the Indian market (and any market) than you.
I have nothing against India per se. And those words I wouldn't even consider as Strong. Look at the troubles Foxconn had getting things done over in India, compared that to China and Brazil. I dont think China is a right comparison because it was first for both parties, but things were much better once everythings start to run. Brazil had everything done and set up within 3 months.
I am not Indians, so I cant read any news from their perspective, but at least the Chinese Newspaper and Western Media agrees on the same point that India is playing hard balls against these companies. ( And you may wonder why Foxconn pulled out of India in the first place ). Too much pride, too little business.
I dont agree with a comment above Apple should leave India, I just think Apple should work with India under the right terms, which benefits both.
Ironically, the longer those guys are protected from the "big bad" big companies, the less likely they are to survive contact with them. That's the double edged sword of protectionism in diminishes the incentive to invest in new more forward industries and divest rapidly from fading ones. It makes you less nimble and makes the shock bigger when it occurs.
Of course, there is a swat of Indian firms that have understood this and do not have the internal Indian market as their main market. They are globally competitive and use the technical talent of Indian schools to their best advantage.
This creates a dual layer economy where those few very big firms in direct contact with the external market are much much more innovative and rich, they cater to the external market and the very top end of the internal market with very little trickling down internally.
The people that lose the most from all this are mostly the Indian mass consumer market especially those at the bottom of the ladder which are not profiting from those small inefficient businesses but are hit by the high prices and the restriction in growth that comes from lower competitivity a big chunk of Indian companies.
That's the opposite tack China took by opening up their market pretty widely, but enforcing strict rules on foreign ownership, capital, etc. That contact fueled an explosive growth in productivity in manufacturing that trickled down more broadly. China came from a very low point in the late 1970s to now.
I think India could do just as good though internal pressures from those profiting from the current scheme may prevent them from heading that way.
India has the asset to go far. Will it? I'm not sure how it will turn out either way but it seems they do seem to have understood that this transition requires a bigger contact of the internal market to the external market.