iPhone manufacturing in India hits another bump in the road

By

India iPhone sales
India won't budge on iPhone component import duties.
Photo: Ste Smith/Cult of Mac

Apple wants to ramp up its iPhone manufacturing in India, but coming to an arrangement with the Indian government over all the necessary details — including Apple’s desired tax breaks — is proving to be hard work.

A new report claims that Apple has asked the government in India to defer a planned increase on import taxes for mobile phone parts, but that the request is unlikely to be successful.

While the government would like have Apple onboard as “showpiece investment,” it has also told the company that it will not budge on the issue of tax breaks for parts that Apple wants to import. “Apple wants duty-free imports of components, India wants indigenization,” said one person with direct knowledge of the talks.

Since most of Apple’s iPhone components are manufactured in places like China, and then sent on to other companies like Foxconn and Pegatron to do the actual assembly work, this could turn out to be a problem — unless there turn out to be companies in India who could replace a significant number of Apple’s existing component manufacturers.

Unfortunately, that second part is unlikely to happen, since India lacks an ecosystem for producing these parts. Counterpoint Research data shows that while more than three-quarters of smartphones sold in India are manufactured locally, around 90 percent of the $14 billion worth of mobile components are imported. India charges a 10 percent tax on imported components.

Growing its market in India

Challenges such as this have made Apple’s expansion into India slow going. While there have been relatively few roadblocks in initiatives like opening a new App Accelerator in Bengaluru, India to help teach coding, efforts like attempts to open a major Indian flagship retail store in the country have been far more difficult. In the case of an Indian Apple Store, Apple has run into similar legal issues regarding local laws that require a certain proportion of Apple’s inventory to be produced locally.

Apple manufacturer Wistron started producing producing iPhone SE models in India earlier this year. More recently, it has attempted to expand its manufacturing in the country and is seeking an additional 100 acres of land to do so. Along with Wistron, other Apple manufacturers Foxconn and Pegatron are also reportedly looking to expand their manufacturing presence in India.

Source: Reuters