Two weeks ago we told you that Apple’s largest manufacturing partner Foxconn plans to invest the princely sum of $1 billion to increase the production of the iPhone in India. The latter is the second-largest smartphone market in the world after China, although it does remain a developing country. As a result, lower-priced phones sell the best including Xiaomi’s value for money handsets and Samsung’s Galaxy A series. The iPhone? It’s considered a luxury item in the country.
By producing the iPhone in India, Apple avoids paying a hefty 22% import tax on units shipped into the country from China. And locally made iPhones fit in with Prime Minister Narendra Modi’s Make in India initiative that favors products made in, well, India. In the country, contract manufacturer Wistron assembles 2016’s iPhone 7 in Bengaluru while in Chennai, Foxconn makes the iPhone XR. By sticking with older models, Apple is able to sell iPhones to Indian consumers at a more affordable price.
For some years there has been talk about Apple producing some of its higher-priced current models in India and India.com notes that on Friday, India’s Commerce and Industry Minister Piyush Goyal said that the tech giant has started to make the iPhone 11 at a Foxconn facility in India. While the phone is the lowest priced among Apple’s current flagship phones, Goyal proudly said in a tweet, “Significant boost to Make in India! Apple has started manufacturing iPhone 11 in India, bringing a top-of-the-line model for the first time in the country”
In India, some iPhone 11 units that were produced in the country are available in retail stores. The lockdown that was ordered due to the coronavirus delayed these units from reaching store shelves but they are now slowly making their way there. However, the locally made iPhone 11 still has the same prohibitive (for Indians) manufacturer’s retail price listed as found on the units imported from China. Anonymous sources say that Apple has asked its supply chain in China to ship components to India for the iPhone SE (2020). The most affordable phone in the iPhone lineup, the device is tailor-made for Indian consumers who cannot afford any model in the iPhone 11 line.
An import tax and the Phase One agreement signed by both countries saved Chinese manufacturers (and companies that assemble their phones in China-like Apple) from having to eat a tax or pass it on to their customers in the form of higher prices. While moving some production out of China was a subject that Apple reportedly had on the table for some time, last year there were some reports stating that the tech giant was looking to move 20% of handset production out of China. India would be the obvious choice although there are questions about whether Apple can put together a supply chain that can provide it with parts in the quantity and quality that Apple needs. The second-largest iPhone assembler, Pegatron, will join Foxconn and Wistron in India according to the latest rumors.
There are over half-a-billion smartphone users in India, but the country had a Gross National Income per capita of $7,680 as of 2018 according to the World Bank; which compares to over $63,000 in the U.S. Thus, premium handset sales are far fewer in India. Apple is the leader in that category while Xiaomi is the top smartphone manufacturer in the country. During the second quarter, the top five smartphone vendors in India were Xiaomi, Vivo, Samsung, Oppo, and Realme. Because of the COVID-19 pandemic, the number of handsets delivered to the country declined almost in half from 33 million in the second quarter of 2019 to 17.3 million during this year’s quarter.