Apple seeks financial incentives before setting up Indian manufacturing

AppleInsider · November 7, 2016 2:07PM

Apple is seeking financial handouts from the Indian government before setting up a manufacturing unit in the country, according to a new report.

The incentives are connected to the Department of Revenue and the Department of Electronics and Information Technology, India's Economic Times said.

"They are doing their due diligence from quite some time," an official told the publication. "The Department of Industrial Policy and Promotion will write to both the departments regarding this communication for their views."

Apple and its manufacturing partner(s) could receive help under the Modified Special Incentive Package Scheme, which among other things can provide subsidies if a company sets up shop in one of India's "Special Economic Zones" -- areas with lowered government regulations designed to lure foreign firms.

Since Apple currently operates just one factory of its own, located in Ireland, Indian manufacturing would presumably be handled by Foxconn. That company was already reportedly interested in setting up an Apple-oriented factory, possibly including iPhones.

Establishing manufacturing could be a prerequisite to opening local Apple stores. In August India's finance minister ratified a proposal that could let single-brand retailers like Apple be exempt from local sourcing rules for three years, so long as they provide "cutting-edge" technology. At the end of those three years, though, Apple would have to have substantial local production in place.

wood1208 · November 7, 2016 2:25PM

Sounds inline with norm. Brings jobs in India. This puts pressure on Chinese bureaucracy not give hard time to Apple.

gatorguy · November 7, 2016 2:29PM

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

I fully expect some number of thumbs-down, but Apple doesn't need handouts no matter how much you like them. Nor do most other corporations. If you disagree than have the courage to explain why, but TBH I doubt anyone will. Anonymous downvotes don't require anything.

The trend has been for the rich to get ever richer, in many cases offering zero value to anyone including the owner of the wealth. At some point the anger of the have-nots will overflow. For someone like Mr. Trump to make so many mistakes and yet still be in the running for the Presidency is proof of that.

plovell · November 7, 2016 2:30PM

"Since Apple currently operates just one factory of its own, located in Ireland..." Doesn't Apple own the Mac Pro factory in the US ? If not, then who owns it ?

gatorguy · November 7, 2016 2:39PM

plovell said:

"Since Apple currently operates just one factory of its own, located in Ireland..." Doesn't Apple own the Mac Pro factory in the US ? If not, then who owns it ?

I think it's actually owned by Flextronics.

mike1 · November 7, 2016 2:48PM

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

Huh? Of course, Amazon and every other company needs financial incentives to build facilities. Why would they choose one state over another. Whomever offers the best deal will get the jobs, construction jobs and increased tax base from everything else that the new facility brings. Same goes for countries. If one country makes it easier to do business, a company has every right and responsibility to maximize the opportunity. That being said, the governments need to due their due diligence and make sure what they are offering really will be beneficial in the long term.

blastdoor · November 7, 2016 2:51PM

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

I fully expect some number of thumbs-down, but Apple doesn't need handouts no matter how much you like them. Nor do most other corporations. If you disagree than have the courage to explain why, but TBH I doubt anyone will. Anonymous downvotes don't require anything.

The trend has been for the rich to get ever richer, in many cases offering zero value to anyone including the owner of the wealth. At some point the anger of the have-nots will overflow. For someone like Mr. Trump to make so many mistakes and yet still be in the running for the Presidency is proof of that.

I totally agree with you. The incentive is -- you get to sell more iPhones in India.

I hope India tells Apple to take a hike (so long as they also tell everyone else to take a hike -- they shouldn't play favorites).

indyfx · November 7, 2016 2:52PM

Holy crap, this story has so many holes you could use it to strain pasta. First off as plovell pointed out it Ireland isn't Apple's only plant. further, if this plant is to be owned (and run) by Foxconn it really isn't an "apple" plant. Its a Foxconn plant, and if so I would guess it is Foxconn not Apple that are seeking Indian subsidies for building it. Cobble together a poorly vetted, not even necessarily factual article, and put "Apple" in the headline... Bazinga... lots of clicks. Sounds like the original author should be ashamed (something (like integrity) increasing absent in todays "journalists")

rogifan_new · November 7, 2016 2:59PM

indyfx said:

Holy crap, this story has so many holes you could use it to strain pasta. First off as plovell pointed out it Ireland isn't Apple's only plant. further, if this plant is to be owned (and run) by Foxconn it really isn't an "apple" plant. Its a Foxconn plant, and if so I would guess it is Foxconn not Apple that are seeking Indian subsidies for building it. Cobble together a poorly vetted, not even necessarily factual article, and put "Apple" in the headline... Bazinga... lots of clicks. Sounds like the original author should be ashamed (something (like integrity) increasing absent in todays "journalists")

Where else does Apple own a manufacturing plant?

dukedarkside · November 7, 2016 3:03PM

Don't you just love how they call government money for companies "investment incentives" and government money for the people "socialism"?

gatorguy · November 7, 2016 3:05PM

mike1 said:

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

Huh? Of course, Amazon and every other company needs financial incentives to build facilities. Why would they choose one state over another. Whomever offers the best deal will get the jobs, construction jobs and increased tax base from everything else that the new facility brings. Same goes for countries. If one country makes it easier to do business, a company has every right and responsibility to maximize the opportunity. That being said, the governments need to due their due diligence and make sure what they are offering really will be beneficial in the long term.

Of course they don't! If NO STATE offered incentives do you really believe Amazon would stop building warehouses that better serve their markets, in turn making more money for Amazon.
As for India it doesn't matter if Vietnam offers Apple an incentive. That won't give them access to India, which I'm sure was one goal of the Indian content law. Apple's incentive is the money they'll make from selling to India's middle and upper classes.

blastdoor · November 7, 2016 3:09PM

mike1 said:

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

Huh? Of course, Amazon and every other company needs financial incentives to build facilities. Why would they choose one state over another. Whomever offers the best deal will get the jobs, construction jobs and increased tax base from everything else that the new facility brings. Same goes for countries. If one country makes it easier to do business, a company has every right and responsibility to maximize the opportunity. That being said, the governments need to due their due diligence and make sure what they are offering really will be beneficial in the long term.

No, they do not "need" financial incentives from governments.

It is only through corruption and coercion that corporations are able to extract these payments.

The fact that they all do it doesn't mean it's good and that we should just look away. It just means that Apple isn't uniquely bad here.

legobatman · November 7, 2016 3:50PM

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

I fully expect some number of thumbs-down, but Apple doesn't need handouts no matter how much you like them. Nor do most other corporations. If you disagree than have the courage to explain why, but TBH I doubt anyone will. Anonymous downvotes don't require anything.

The trend has been for the rich to get ever richer, in many cases offering zero value to anyone including the owner of the wealth. At some point the anger of the have-nots will overflow. For someone like Mr. Trump to make so many mistakes and yet still be in the running for the Presidency is proof of that.

long time reader but registered just to comment on this.

there really is not a specific "financial" incentive (e.g. cash handout) for most economic development programs governments run. that said, these incentives are evaluated on a financial basis. but your points (and the original article) do not cover the entirety.

first off, India has no choice but to offer incentives as China, Vietnam, and even the USA etc. all offer similar packages to promote / attract foreign investment. thus India not offering or slimming down an economic package is like a smart phone vendor not offering a camera or putting a 2 MP camera on a phone. it'll be dead before it hits the market.

second, if they were to build a manufacturing plant there is land leases to consider, construction firms, heavy equipment investments, local / international logistics, staffing levels, production levels, local / regional / national corporate tax etc. assume this is a greenfield build, then most governments tend to provide various "incentives" to local construction firms participating because this gives them more control. you don't want Apple footing 100% of the bill... a big risk in any large scale capital investment is for the investor to pull out capital and you're stuck with a quasi-developed land that others may or may not want.

then on to taxes. again, many economic proposals use a tiered 3, 5, 10, and 15 year benefit expiration dates of some sort to ensure the corporation has ample time to really grow some roots in the local region. again, this works to the advantage of both parties. the longer a company is established in a region the harder it is to remove itself. the government basically trades short-term tax revenue for long-term economic growth.

also consider logistics infrastructure. will there be a local airport to handle freight? if not, what would it cost to construct one? are there advantageous flight routes to get materials and products in / out of plant? if not, what would it cost to get one established? what are the processes? do new highways need to be built for fleet based transportation? things like this can only be done by the local government and there is no way in hell Apple, Google, Amazon, or Facebook would be able to do this or able to pay / manage the project. once again, a huge economic incentive.

lastly to your point on population. so what? China has the world's largest population but at any point in time the government can shut down your operations and kick you out (e.g. Google) or pour massive amounts of money into a local competitor (e.g. DiDi Kuadi vs. Uber). how would anyone convince "rich western companies" to foot 100% of their international expansion bill to play in a market with relatively weak business and IP laws?

just some alternative thoughts. i have worked and evaluated a couple of economic proposals before... it is a very complicated process and by far not as straight forward as the Apple Insider paints it to be.

robin huber · November 7, 2016 4:04PM

Welcome to the world economy. Building walls, both literal and figurative is regressive and doomed to the trash heap of history. Like it or not mass transportation and cheap air travel means the spread of diseases and ideas is endemic. Get used to your new neighbors; they're here to stay. Whether it's China or Trump, trying to create an insular economy will not fly in the long run. In the meantime, Apple is doing what it can to play by the new rules.

indyfx · November 7, 2016 4:31PM

rogifan_new said:

indyfx said:

Holy crap, this story has so many holes you could use it to strain pasta. First off as plovell pointed out it Ireland isn't Apple's only plant. further, if this plant is to be owned (and run) by Foxconn it really isn't an "apple" plant. Its a Foxconn plant, and if so I would guess it is Foxconn not Apple that are seeking Indian subsidies for building it. Cobble together a poorly vetted, not even necessarily factual article, and put "Apple" in the headline... Bazinga... lots of clicks. Sounds like the original author should be ashamed (something (like integrity) increasing absent in todays "journalists")

Where else does Apple own a manufacturing plant?

plovell (though his post seems to have disappeared) pointed out that Apple manufactures the Mac Pro in a plant in Austin Texas. (which I believe they own and operate)

wiggin · November 7, 2016 4:36PM

mike1 said:

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

Huh? Of course, Amazon and every other company needs financial incentives to build facilities. Why would they choose one state over another. Whomever offers the best deal will get the jobs, construction jobs and increased tax base from everything else that the new facility brings. Same goes for countries. If one country makes it easier to do business, a company has every right and responsibility to maximize the opportunity. That being said, the governments need to due their due diligence and make sure what they are offering really will be beneficial in the long term.

I can kind of see both sides. If I were a lawmaker in a state and had an opportunity to bring a bunch of jobs into my state from another location by offering incentives, why wouldn't I consider it? But then if you consider the broader implications is it really the best option for the economy? Does it create another "the rich get richer...situation" because the practice almost exclusively benefits the large corporations. Smaller companies, who generate most of the jobs in the US, would likely never have the leverage to get such incentives.

No good answer. States, and countries, are going to compete with each other to get the jobs, but it creates an uneven playing field between the large and small companies (similar to large companies have the resources to move operations overseas for tax benefits, but smaller companies usually do not). In this case, if having manufacturing in India is a requirement for selling products there, and if Apple really wants to get into that market it would seem that Indian lawmakers would have little motivation to provide significant incentives to Apple. But of course it'd be silly for Apple to not at least ask.

gatorguy · November 7, 2016 5:23PM

indyfx said:

rogifan_new said:

indyfx said:

Holy crap, this story has so many holes you could use it to strain pasta. First off as plovell pointed out it Ireland isn't Apple's only plant. further, if this plant is to be owned (and run) by Foxconn it really isn't an "apple" plant. Its a Foxconn plant, and if so I would guess it is Foxconn not Apple that are seeking Indian subsidies for building it. Cobble together a poorly vetted, not even necessarily factual article, and put "Apple" in the headline... Bazinga... lots of clicks. Sounds like the original author should be ashamed (something (like integrity) increasing absent in todays "journalists")

Where else does Apple own a manufacturing plant?

plovell (though his post seems to have disappeared) pointed out that Apple manufactures the Mac Pro in a plant in Austin Texas. (which I believe they own and operate)

They don't own the plant according to news reports dating to the announcement of MacPro's being manufactured in the US. It's owned and operated by Flextronics. unless there's been some change.

mike1 · November 7, 2016 9:29PM

gatorguy said:

mike1 said:

gatorguy said:

Apple really wants financial incentives? Wouldn't being able to sell more product to Indian consumers at near-typical Apple margins be enough incentive? It doesn't sound quite right IMHO for the richest company on the planet to expect common Indian taxpayers to cover some of the plant costs by way of reducing Apple's taxes that enable Apple to sell there.

I don't like seeing big & relatively rich American corporations wrangle tax incentives from US states to build plants or add jobs/equipment. Amazon for instance doesn't need any financial assistance to build warehouses that they financially benefit from nor do big pharmaceuticals or health providers moving or adding headquarters. Yet State lawmakers who generally are relatively well-off themselves stumble all over themselves to pass these giveaways. For what reason should a wealthy corporation receive tax benefits, to make themselves even wealthier? They're going to build plants and add offices anyway if the business is there. That this occurs in poor countries with very high levels of poverty is worse.

India made laws requiring a certain percentage of products be Indian-manufactured in order to push companies to invest and create jobs in return for access to their consumers. If they don't think India is important enough to invest in then they don't get to sell there. Big incentive for access to the 2nd largest country by population. But to then water-down the benefits by giving companies tax breaks to do so?? Seems far too typical that tax laws benefit the ones making the laws to the detriment of those of lesser influence.

Huh? Of course, Amazon and every other company needs financial incentives to build facilities. Why would they choose one state over another. Whomever offers the best deal will get the jobs, construction jobs and increased tax base from everything else that the new facility brings. Same goes for countries. If one country makes it easier to do business, a company has every right and responsibility to maximize the opportunity. That being said, the governments need to due their due diligence and make sure what they are offering really will be beneficial in the long term.

Of course they don't! If NO STATE offered incentives do you really believe Amazon would stop building warehouses that better serve their markets, in turn making more money for Amazon.
As for India it doesn't matter if Vietnam offers Apple an incentive. That won't give them access to India, which I'm sure was one goal of the Indian content law. Apple's incentive is the money they'll make from selling to India's middle and upper classes.

There is zero chance states (or countries) will stop offering incentives because it is usually in their best interest to do so, just like it is in Apple's or Amazon's best interest to seek the best deal possible. In the case of India, Apple might not have as much influence because of their need to build in order to sell. But if Vietnam offered them and Foxconn a deal they couldn't refuse to move final assembly, you bet they would take it seriously and start a transition.

Ali1 · November 8, 2016 12:15PM

Designed by apple in California, Made in "india" sounds awkward.

securtis · November 8, 2016 2:48PM

Apple thinks they need to be the indian market, which they probably do (largest remaining untapped market). However, they know it will be tough and india will make lots of demands upon them from a sourcing perspective. I think apple knows its going to be difficult to turn a buck there so they want all the incentives they can.

Apple seeks financial incentives before setting up Indian manufacturing

Comments