Apple may be running into problems in China, but it doesn’t seem like its campaign to expand into India — another vast country with plenty of potential for smartphone growth — is going any better.
According to a new report, India’s finance minister has ruled that Apple must conform to local sourcing laws to open official Apple Stores within India, despite previous rumors stating that Apple would be exempted from such rules.
Minister Arun Jaitley is reportedly supporting a decision made by India’s Foreign Investment Promotion Board stating that Apple will have to procure 30 percent of components locally — which currently does not happen since Apple produces the majority of its products in China.
While India can provide exemptions to this local sourcing law, it is upheld as a way to try and bring more foreign investment to India. Apple has done this recently, with plans to invest $25 million in a new office complex in India, as well as a brand new local office dedicated to Apple Maps. Between them, these projects will create thousands of new jobs in India.
However, despite the growing popularity of Apple products, Apple has thus far had to sell its products in India exclusively through premium resellers operating on a franchise model. In March this year, the company made clear its ambitions to open a series of brick-and-mortar retail stores in India — including a major flagship store with a design reminiscent of the iconic Fifth Avenue Apple Store in New York. These plans no appear to be in doubt.
Will things change? Technically the finance minister’s decision could be overturned by Prime Minister Narendra Modi, with whom Tim Cook recently met with during his packed visit to the country. But it’s definitely a blow, particularly when taking into account another recent Indian verdict against Apple, barring it from importing refurbished iPhones to sell at a lower price point.
Maybe Cupertino will just have to hold off on its plans until iPhone manufacturers including Foxconn and Pegatron finally open their proposed factories in India, which should make Apple’s adherence to local sourcing laws a bit more straightforward.
Source: Bloomberg
Luke Dormehl is a U.K.-based journalist and author, with a background working in documentary film for Channel 4 and the BBC. He is the author of The Apple Revolution and The Formula: How Algorithms Solve All Our Problems … and Create More, both published by Penguin/Random House. His tech writing has also appeared in Wired, Fast Company, Techmeme and other publications.
One response to “Apple’s plans for Indian retail stores suffers massive blow”
If you’ve ever flown an international flight into India, you notice lots of electronics (TVs, laptops, phones, etc.) being carried into the country from other places – Singapore, Bankok, KL, even the US. Because of laws like this, and the tax structure which make these items expensive in India (while almost everything else is cheap).
The amount of money they are losing because of protectionist laws like this must be astounding. If Apple decides to not open stores there, they will lose, sure, but the Indian government will lost more. Apple will have fewer sales, sure, but people will just buy their phones abroad, and bring them in, where the government will those their cut of taxes and the investment a major corporate like Apple can bring in.