India offers Apple a compromise on iPhone manufacturing incentives

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Apple supplier is increasing its ability to build masses of iPhones in India
Apple is already manufacturing iPhones in India.
Photo: Ste Smith/Cult of Mac

To encourage manufacturing in India, Indian authorities have offered to let Apple import smartphone components for use in local manufacturing, tax free.

Apple previously asked for a 15-year tax holiday from paying tax on importing components it needed for Indian manufacturing. The request was denied by authorities, but it seems that a compromise may be reached, whereby Apple will gradually increase the local production of components in India.

Apple hasn’t yet agreed to the offer. “We are waiting for [them] to come back,” Ravi Shankar Prasad, the federal minister for Electronics and IT, told Reuters.

While it is forging ahead with production in India, Apple has reportedly pushed for a number of manufacturing incentives in the country — such as exemption from rules stating that manufacturers must print detailed product information onto their devices, thereby potentially cluttering Apple’s minimalist design.

Speaking today, a federal minister in India says that Apple wants to expand its contract manufacturing facility in Bengaluru, where Apple contractor Wistron is building iPhones. Production on the iPhone SE models in India has already started, and finished handsets could arrive in the hands of customers as soon as this week.

Growing the Indian market

Apple’s enthusiasm for growing its market penetration in India is well known. During Apple’s most recent earnings call, Tim Cook told investors that, “We set a new March quarter record for India where revenue grew by strong double digits. We continue to strengthen our local presence across the entire ecosystem and we’re very optimistic about our future in this remarkable country with its very large young and tech-savvy population, fast growing economy and improving 4G infrastructure.”

According to figures from Kantar Worldpanel, smartphone penetration in India hit a 48 percent growth rate in the first quarter of 2017 — up from the 16 percent growth rate seen one year earlier. Despite the country’s 1.3 billion population, however, at present Apple only represents around 3 percent of handsets sold India.

In addition to Wistron, other Apple manfacturers Foxconn and Pegatron are also looking to expand their manufacturing presence in India.