US-China trade war forces iPhone-maker to rethink strategy, call for stable policy
To cushion the impact of the ongoing trade war between the US and China on its business, iPhone-maker Apple wants to hedge its bets by shifting around 10-15 per cent of its manufacturing to India.
However, the company also wants the Indian government to ensure a stable policy regime with sector-specific incentives
to help it establish an export hub in the next 5-10 years.
The government, on its part, too wants Apple to stay and expand its business here. Apple setting up full-fledged operations in the country means more investments, jobs and technology coming into the country, which has the scale to drive India’s stunted electronic manufacturing sector, a senior government official told BusinessLine. The company will bring in advanced technologies used in manufacturing of ultra-premium handsets and electronic components, which will enhance India’s tech capabilities.
Besides, this will also positively impact skill development, though this will be seen in the medium to long term, the sources said.
Expansion plan
Apple already has over 3,500 authorised retailers and service centres in India, which employs over 15,000 people. In addition, it plans to open two-three physical and one online single brand retail store of its own, which is in line with its ‘global experience’ centres for ‘Apple branded’ products only.
“Apple has clarified that it does not seek any specific concessions, but instead, a sector-specific policy to boost smartphone exports and address India’s shortcomings vis-a-vis China and Vietnam — two of the largest smartphone exporters in the world,” a senior official explained.
According to industry sources, the cost of manufacturing in India is higher by 12-18 per cent compared with China and Vietnam, on account of scale, infrastructure, logistics, taxes, cost of capital/land and tariffs in smartphone
manufacturing.
India’s labour cost arbitrage, though significant for other sectors, has limited potential for Apple, since it constitutes only one per cent of the total iPhone manufacturing cost.
“If Apple shifts 20 per cent of its manufacturing and exports to India, it would constitute a nearly 12 per cent increase in India’s overall exports, potentially making Apple India’s largest exporter and a significant job creator within three-five years,” said another senior government official.
Once, Apple’s ecosystem comes to India, local companies can potentially become global suppliers of smartphones, chargers, battery packs, USB cables, printed circuit boards (PCBAs) and other components from India, he said.
“For instance, in the case of Maruti Suzuki India — the
company brought all the component makers, thereby setting up the whole ecosystem of manufacturing cars in the country — and also set up a global supplier chain here,” the official explained.
Apple wants the government to support at least those high-premium smartphone makers (right now only Apple and Samsung world over), to work on incentive-based, long-term, export-linked policy, to boost the overall smartphone exports from India.
