India motivating iPhone production with incentive rule changes

Posted:
in iPhone edited May 2020
India is making it more attractive for Apple and other mobile phone companies to set up production facilities in the country by adjusting the rules for its PLI scheme, a change that could allow Apple to increase manufacturing in the region.




The government of India has been trying to tempt large-scale manufacturers to bring more smartphone and mobile phone production to the country with its production-linked incentive (PLI) scheme. PLI offers a variety of benefits over a five-year period if foreign manufacturers abide by specific rules or reach certain targets when setting up or operating production facilities.

Despite the potential benefits, Apple has so far declined to take up the offer, but changes to the scheme reported by the Economic Times could make it far more useful for the iPhone maker to take up.

One of the clauses in the scheme is that plant machinery acquired from China and South Korea for use in production has to be valued at only 40% of its real value. To a manufacturer like Apple, it therefore would either have to source the same machinery locally to have a higher valuation, or import more than twice as much machinery as it may necessarily need to meet required expenditure levels.

On Friday, an official aware of a meeting of a committee of secretaries organizing the scheme claims the 40% clause has been removed. A few other changes are also being made, such as including members of the smartphone manufacturing industry into discussions before making any further changes to the scheme once a company has invested and started production.

"Earlier, a clause permitted only the empowered committee to be able to unilaterally change the rules but investors had voiced concerns with this clause," the official claims.

Other changes include alterations to various caps, the removal of a clause that would allow the government to release the incentive to manufacturers meeting targets only if it had the money to do so, and a reduction of the "excessive business information" the government wanted from participating companies.

Manufacturers will receive graded incentives between 4% and 6% of production value over a five-year period, if they produce smartphones that exceed certain values that increase each year, in excess of the base year's production value.

It is expected the scheme's changes will be formally announced over the next week.

An expansion in manufacturing

The government's aim with the scheme is to try and convince more foreign companies to use India for its manufacturing instead of relying on existing supply chains operating in China, as well as other regions. For manufacturers, aside from a financial benefit offered by the scheme, expanding into production in India provides an opportunity to diversify the supply chain, allowing it to not be as badly affected by major emergencies like COVID-19, or political issues like the US-China trade war.

Apple's main production takes place in China, but it is allegedly looking at India as a possible secondary production hub. Apple already uses contract partners Wistron and Foxconn for local iPhone production, with Apple's participation in the scheme revolving around increasing its manufacturing through its partners.

On May 11, it was alleged Apple was considering taking up India's offer, and had been speaking with high-level government officials for months about possibly scaling up production. It was suggested Apple was seeking to shift roughly a fifth of existing China-based output to India, which could equate to $40 billion in local manufacturing revenues over the next five years, and could make Apple India's largest exporter in the process.

It is believed Apple sells iPhones worth around $1.5 billion per year in India, with a market share of between 2 and 3%. As existing manufacturing efforts are thought to total less than $0.5 billion annually, Apple would therefore need to make considerable investments to bolster its supply chains to reach the required PLI target.

The increase in manufacturing will also help Apple with its other aim of owning its own retail outlets in India. Apple is intending to open the first retail space in the country in 2021, but to do so, it had to abide by some tough restrictions.

Under ownership rules, a foreign brand like Apple would need to locally source at least 30% of its products sold in stores, which would largely consist of iPhones made by Foxconn or Wistron in the country. A change was introduced where exports would also count towards the 30% sourcing rule, incentivizing Apple to increase its manufacturing investment in the process.

Comments

  • Reply 1 of 13
    F_Kent_DF_Kent_D Posts: 98unconfirmed, member
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business
    watto_cobra
  • Reply 2 of 13
    fred1fred1 Posts: 1,108member
    I can understand the requirements that a certain percentage of items or parts of items sold in India be manufactured there, but to also put heavy restrictions on manufacturing doesn’t make sense to me. Either I’m missing something or this is typical doings by politicians who make laws without thinking things through.  India does seem to be poised to have its own version of the Celtic Tiger that Ireland has due to its inexpensive labor force and huge number of native English speakers. Let’s hope they can make this happen and learn from the Irish to avoid the downfalls. 
    edited May 2020 watto_cobra
  • Reply 3 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    The only thing India has to offer is a huge population and cheap labor.
    Other than that it has no financial or industrial foundation or integrity.   It is not a place in which to make significant long term, fixed investments.  It could be.   It could rival China -- but it would need to resolve its internal, systemic problems first.
  • Reply 4 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    F_Kent_D said:
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business

    Too them, that is a real job.   The alternative is poverty.
  • Reply 5 of 13
    anantksundaramanantksundaram Posts: 20,402member
    F_Kent_D said:
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business

    Too them, that is a real job.   The alternative is poverty.
    Such stupid over-generalizations (the prior post is included too in that assessment). Such willing ignorance. 

    And for a poster who often complains about an orange-haired person who is supposedly a racist nationalist, such a blind incapacity to look in the mirror. 
    watto_cobragatorguy
  • Reply 6 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    F_Kent_D said:
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business

    Too them, that is a real job.   The alternative is poverty.
    Such stupid over-generalizations (the prior post is included too in that assessment). Such willing ignorance. 

    And for a poster who often complains about an orange-haired person who is supposedly a racist nationalist, such a blind incapacity to look in the mirror. 

    100% 0n personal insults
    0%  On content
  • Reply 7 of 13
    anantksundaramanantksundaram Posts: 20,402member
    F_Kent_D said:
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business

    Too them, that is a real job.   The alternative is poverty.
    Such stupid over-generalizations (the prior post is included too in that assessment). Such willing ignorance. 

    And for a poster who often complains about an orange-haired person who is supposedly a racist nationalist, such a blind incapacity to look in the mirror. 

    100% 0n personal insults
    0%  On content
    You should flag mine, then. Go ahead.

    If so, I’ll make sure to flag yours for the reasons I mentioned in my post.
    watto_cobramuthuk_vanalingamgatorguy
  • Reply 8 of 13
    bestkeptsecretbestkeptsecret Posts: 4,265member

    Despite all the digs at India, there are more chances of Apple manufacturing in India than in the US.

    anantksundaram
  • Reply 9 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    F_Kent_D said:
    India needs to do something to get their people real jobs. Most of the lower paid people over there are too busy these says with scamming people of the US and other countries out of money by acting like Microsoft tech support and Social Security Administration employees. It’s a big business in India and those people need real jobs. Maybe this tech manufacturing gig can get these folks out of the scam business

    Too them, that is a real job.   The alternative is poverty.
    Such stupid over-generalizations (the prior post is included too in that assessment). Such willing ignorance. 

    And for a poster who often complains about an orange-haired person who is supposedly a racist nationalist, such a blind incapacity to look in the mirror. 

    100% 0n personal insults
    0%  On content
    You should flag mine, then. Go ahead.

    If so, I’ll make sure to flag yours for the reasons I mentioned in my post.
    Still 0%
  • Reply 10 of 13
    k2kwk2kw Posts: 2,075member

    Despite all the digs at India, there are more chances of Apple manufacturing in India than in the US.

    Yes but Trump should still have imposed the highest Tariffs possible on China.
  • Reply 11 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    k2kw said:

    Despite all the digs at India, there are more chances of Apple manufacturing in India than in the US.

    Yes but Trump should still have imposed the highest Tariffs possible on China.

    No, thanks.
    The Apple Tax is enough.  I don't need any Trump taxes on top of it.
  • Reply 12 of 13
    anantksundaramanantksundaram Posts: 20,402member
    ........
    ............
    0%
  • Reply 13 of 13
    GeorgeBMacGeorgeBMac Posts: 11,421member
    ........
    ............
    0%

    So, you put your fingers in your ears and scream "I can't hear you!"
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