Apple starts iPhone 6s mass production in India to combat import duty hikes
Apple has reportedly started commercial production of a second iPhone in India, with a Wistron facility manufacturing the iPhone 6s for sale in the region alongside the iPhone SE, a move that will help Apple avoid import duties for the second India-produced model.
Mass production of the iPhone 6s started last week at Wistron's Bengaluru facility, senior industry executives advised to the Economic Times. The change in manufacturing follows a reported production trial of the iPhone 6s and iPhone 6s Plus in April, with the executives noting the iPhone 6s was selected due to its sales potential.
According to research firm Counterpoint, it is estimated the iPhone 6 series accounts for a third of iPhone sales in India. By comparison, the locally-made iPhone SE provides less than 15 percent of revenue.
Manufacturing partner Wistron received approval to expand its facilities in March, which cleared the way for production of a new model. At the time, it was believed the new factory on 43 acres of land would involve an investment of 6.8 billion rupees ($105 million) from Wistron on the land and the facility, which would be used for smartphone production as well as Internet of Things and bio-tech devices.
Producing the iPhone 6s in India will help Apple avoid any changes to import duties for the smartphone, in a similar way to how the iPhone SE was protected from New Delhi tax increases earlier in 2018.
While the Made-in-India iPhone 6s will only be sold in India, the tax saving is unlikely to affect the price paid by consumers, the executives believe. Since it will take time for the locally-produced iPhone 6s to scale up, imports will continue until production capacity improves, causing some of the iPhone 6s supply to be hit with the tax.
The executives claim Apple intends to expand local production even more, to further protect itself from tax increases. In December, the basic customs duty for smartphones rose from 10 percent to 15, before rising again to 20 percent in February, while in April, the government imposed a 10-percent customs duty on electronic components, including circuit boards, camera modules, and connectors.
In 2018 alone, these tax rises forced Apple to increase its prices in India by between 6 and 7 percent.
Apple's efforts in India have been fruitful for the company, according to details revealed in its Fiscal Year 2017 report, published in April. Revenue in India grew year-on-year by 17 percent with profits up 44 percent, but with overall revenues lagging far behind Chinese vendors including Xiaomi, Vivo, and Oppo who concentrate on the value end of the smartphone market.
Mass production of the iPhone 6s started last week at Wistron's Bengaluru facility, senior industry executives advised to the Economic Times. The change in manufacturing follows a reported production trial of the iPhone 6s and iPhone 6s Plus in April, with the executives noting the iPhone 6s was selected due to its sales potential.
According to research firm Counterpoint, it is estimated the iPhone 6 series accounts for a third of iPhone sales in India. By comparison, the locally-made iPhone SE provides less than 15 percent of revenue.
Manufacturing partner Wistron received approval to expand its facilities in March, which cleared the way for production of a new model. At the time, it was believed the new factory on 43 acres of land would involve an investment of 6.8 billion rupees ($105 million) from Wistron on the land and the facility, which would be used for smartphone production as well as Internet of Things and bio-tech devices.
Producing the iPhone 6s in India will help Apple avoid any changes to import duties for the smartphone, in a similar way to how the iPhone SE was protected from New Delhi tax increases earlier in 2018.
While the Made-in-India iPhone 6s will only be sold in India, the tax saving is unlikely to affect the price paid by consumers, the executives believe. Since it will take time for the locally-produced iPhone 6s to scale up, imports will continue until production capacity improves, causing some of the iPhone 6s supply to be hit with the tax.
The executives claim Apple intends to expand local production even more, to further protect itself from tax increases. In December, the basic customs duty for smartphones rose from 10 percent to 15, before rising again to 20 percent in February, while in April, the government imposed a 10-percent customs duty on electronic components, including circuit boards, camera modules, and connectors.
In 2018 alone, these tax rises forced Apple to increase its prices in India by between 6 and 7 percent.
Apple's efforts in India have been fruitful for the company, according to details revealed in its Fiscal Year 2017 report, published in April. Revenue in India grew year-on-year by 17 percent with profits up 44 percent, but with overall revenues lagging far behind Chinese vendors including Xiaomi, Vivo, and Oppo who concentrate on the value end of the smartphone market.
Comments
Again, why is it a one-way street?
However, your idea that the phones for a region should be made there (including the U.S.) is an interesting way to solve this problem and create local jobs. But Tim Cook would never go along with that because phones made in the U.S. for U.S. purchases would cost double or triple what they do now because of our higher standard of living.
https://www.vox.com/2016/10/13/13268980/cheese-glut-united-states
It’s not a one way street. The US has its own protected industries, such as the notorious US sugar cartel, which hurts US consumers and penalizes our Latin American neighbors who are pushed by sugar import duties to earn a better living producing illicit crops.
Just because India and other foolish countries do something stupid with their economic mismanagement doesn’t mean we have follow. We’re not lemmings (thank you Steve).
Nothing good comes from imposing trade restrictions on your own citizens. As a US citizen I object very strongly when my Government dictates what a can and cannot buy and from whom I can buy.
We're good so far, and I'm trying to loosen things up generally, but if recent history is any indication, things can and do spiral out of control very quickly.
US farmers are provided massive subsidies for agricultural water versus what you might pay in a single family urban household. Difference is price is somewhere between two and 3 orders of magnitude - no joke. Remember that next time you're shopping produce.
As an example, Las Vegas allocates/buys water when it is available and pumps it into its aquifers for future use. The problem is that the Colorado River Basin, the source of most of this water for Southern California, Southern Nevada, and Arizona, is suffering from snowpack shortages due to Climate Change, ie, the runoff isn't near historic averages.
What ends up happening, is that those farming operations are economically stressed by drought, some operations sell their water rights to Municipalities, and then continue with dry land agriculture or often enough, sell the land for development.
Pretty much describes agriculture in the Western States.
Foxconn employs about 1,000,000 workers in three cities. There aren't 300,000 highly trained workers in any three cities in the US that aren't already working. US unemployment is at post-WWII lows of 3.1% with over 66% participation (a post-WWII high).
US standard of living has little to do with the impediments to manufacturing in the US.
You know, the stuff making people very sick and grossly obese and immune to antibiotics.
Then there is the problem with insane over-production that has crashed market so low that there are no more small farmers - and the mega corporations dump over 50 MILLION gallons annually.
Sooooo... massively overproduced toxic product that destroyed thousands of livelihood’s, sick and dying population, and an entire industry that can’t sustain itself - - - it’s a one-way street because US dairy is the Hwy of Death.
Apple will produce iPhones in the USA when it makes sense financially to do so. In other words, when robots are advanced and cheap enough to do the vast majority of the work.
That day isn’t today... we can see with Tesla that the technology isn’t quite there yet. I’m going to guess 5-10 years...
Once the technology is “there” it’s going to create a new set of problems. Jobs across many industries will disappear in higher numbers than new jobs created. This will likely lead to increased social stratification. For mental health reasons, humans need to feel their work has value.
In the USA we’ve been attempting to keep the jobless rate low, but that’s resulted indirectly in high drug use and increased mental health issues. In the EU they’ve taken a different approach (socialist) but have been better able to main their middle class. The USA remains more productive but at significant social costs.
The point is, there is no easy answers to what’s coming. What do we do when 25-50% of the populations jobs are no longer needed?
President Trump (and politicans in general) push populist ideas that suggest easy answers. There motivation is re-election, but they’re not solving problems. When the easy answers don’t work it’s always the other parties fault.
My opinion is financial protectionism (tariffs) aren’t going to improve things. The main problem is likely the “strong dollar” causing trade imbalances. In a nuttshell it allows the USA to buy foreign products cheap, but what we sell is expensive to the rest of the world.
Every country manipulates it’s currency in an attemp to benefit. You’d think we’d want to depreciate the dollar to increase American manufacturing, but the rich and influential benefit the most in keeping things as they are (they consume high ticket items more cheaply than otherwise possible).
One possibility is a universal currency (think bitcoin) but that creates it’s own set of problems. For example, manipulating a currency is an easy way to break out of a recession.
I think our first step needs to be getting rid of the “minimum wage” and implementating a “living wage” but again there are no easy answers.
Companies like Apple are going to navigate whatever politicians do in a way that maximizes profits, and give them a competitive advantage. They’re not the “problem” beyond their ability to influence policy makers.
The “one-way street” doesn’t exist. The USA has been the greatest influence in creating the system that exists today. The idea “free market” doesn’t exist. Every country subsidizes industries and implementates policy to protect local industries. The USA subsidizes food production in particular which gives us enormous political power.
Through military spending the USA subsidizes many industries. Do you think there is a foreign power or terrorist threat that can be more than an annoyance to the USA? There isn’t... but we’ll keep the “threat” alive because it gives enormous competive advanges to thousands of US companies. Etc. Etc.
Let use the two examples you pointed out. Milk, the US has the most efficient milk production in the world in a free trade world would mean the US should dominate this industry and Canada milk product should suffer or step it up to match the US or go out of business. This is not happening, countries like Canadian are allow to protect an industry which is not running in the most efficient way at the cost to US businesses.
Now solar panels, this is not political but, the Obama administration wanted to grow solar and wind at the expense of our nuclear and coal power production, but Solar production in the US was not cost effective to make that happen when the administration want it. The administration allowed the Chinese to dump panel in the US to drive growth but it kill the US solar panel industry. This is not the same as the milk example since China was not the most efficient producer of solars, they just made them cheaper since the government subsidized them. The same was true about wind power. In this case US wind power companies move production to China to decrease costs, but in the end the Chinese stole all the IP and under cut US manufacturers. This happen because China requires that the IP be transferred to a Chinese owned entity, since in China US companies are not allow to have majority ownership in Chinese operations.
I have been saying this for a long time and now Trump is saying it, our duties and tariffs should mirror what other counties are doing. We match exactly what they do. In India, if they want to charge 40% tariffs on phones and 100% on motorcycles then we hit them with 40% to 100% tariff on everything that comes out of India including outsource IT services they provide to US companies.
I am all for free trade as long as politician stay out of it and let the free markets dictate pricing and which country can make products in the most efficient way.