Apple

Any Apple Store open in India must have 30% of its inventory locally sourced?

posted by Alan F. / May 25, 2016, 7:56 PM

Any Apple Store open in India must have 30% of its inventory locally sourced?

Last week, when Apple CEO Tim Cook met with Indian Prime Minister Narendra Modi, Cook told him that Apple is interested in opening multiple Apple Store units in the country. But India is in the midst of a "Made in India" campaign that is promoting domestically manufactured products. As a result, if Apple does open Apple Stores in India, 30% of the products it sells must be produced in the country according to a senior government official.

In order to promote the high tech industry in India, the government was able to get legislation passed that allows foreign retailers selling such products to be exempt from the 30% rule. Perhaps due to the fact that Apple manufacturers most of the devices and gadgets sold in the Apple Store, the same senior official told Reuters that Apple won't be included with the group of foreign retailers allowed to ignore the regulations pertaining to domestically manufactured goods.

Apple is also seeking to manufacture the iPhone in India. One of the contract manufacturers that Apple uses to assemble its smartphone, Foxconn, is reportedly close to signing a deal to build a factory in the country. That could help Apple meet the 30% threshold for its retail stores.

India could be an important market for Apple. During the difficult fiscal second quarter, iPhone sales rose 56% year-over-year in the country. Next year, India is poised to surpass the U.S. and become the world's second largest smartphone market after China. But with a per capita income of $1500, most Indian consumers cannot afford to buy a new iPhone. That is why the top selling iPhone model in India is the Apple iPhone 5s, priced at $300. Tim Cook said last week that he would like to drop the price of the product in India, but says that Apple needs to keep the high quality of the iPhone intact.

A consumer walks past an Indian electronics store hawking the Apple iPhone 6 in 2015

source: Reuters

FEATURED VIDEO

Options

25 Comments

1. Mxyzptlk unregistered

Apple is all about quality, hardware wise. I think they should push the SE and make the older models cheaper.

posted on May 25, 2016, 7:59 PM 3

2. kiko007

Posts: 7493; Member since: Feb 17, 2016

Agreed . It would help their image in the less affluent nations while getting back some much needed market share. India is a very important market, but with the income limitations of the general population there, it's hard seeing newer models doing well. Apple's best bet is to sale their older but still capable hardware (I.e. the 5s and 6) at a discounted rate.

posted on May 25, 2016, 8:06 PM 1

3. kiko007

Posts: 7493; Member since: Feb 17, 2016

And I know what some of you are going to say. "Why can't they get newer hardware at a discount?" and the answer is fundamental to Apple's business strategy. Apple has never intended for iPhones to stretch outside the premium market, at least concerning new hardware. They would see no benefit to offering staple products at a cheaper rate because the services they offer aren't nearly as supportive as Google's or MSFT. Apple at it's core is a hardware company trying to become a software company.

posted on May 25, 2016, 8:13 PM 0

9. sgodsell

Posts: 7004; Member since: Mar 16, 2013

Apples iPhone 6s+ with 16gb cost to manufacture is around the $230. So all the other iPhones are considerably less to make and manufacture. If Apple was really concerned about its declining sales and market share. Then Apple would not charge so much for their devices. Especially creating a 16gb device to begin with, which no Android flagship offers a 16gb device. If they offer 16gb devices again, then that is clearly greed on Apples part, and nothing else. Also kiko007 what koolaid have you been drinking, especially when you stated that Apple is trying to become a software company. You must be an idiot or your on some good drugs. If Apple ever tried to become a software company, then they would make software for other platforms, and not lock and make their hardware only work with their platforms. So how well does their watch work with other platforms or devices? Yeah, we know the answer to this question.

posted on May 25, 2016, 9:09 PM 6

12. kiko007

Posts: 7493; Member since: Feb 17, 2016

"Also kiko007 what koolaid have you been drinking, especially when you stated that Apple is trying to become a software company. You must be an idiot or your on some good drugs. If Apple ever tried to become a software company, then they would make software for other platforms, and not lock and make their hardware only work with their platforms. So how well does their watch work with other platforms or devices? Yeah, we know the answer to this question." Let me start by explaining something to you. If you are going to insult someone's intelligence, you probably shouldn't make a grammatical error (*you are or you're*) within the next 5 words :-D. Now back on topic. Perhaps I shouldn't have said software company. What I meant was a "Service" company. Apple Music, iCloud , and other Apple developed services have become mainstream. So much so in fact, that last quarter Apple made more off of their services than their Mac and iPad sales.

posted on May 25, 2016, 9:24 PM 2

25. AlikMalix unregistered

Kiko, following apples behind the scenes news - that's exactly right, and this of us that don't go to Apple articles just to troll others - actually read that Apple is expanding rapidly into "services" (I knew what you meant when you said "software", and it's doing well financially in those markets.

posted on May 25, 2016, 10:50 PM 0

28. sgodsell

Posts: 7004; Member since: Mar 16, 2013

"Perhaps I shouldn't have said software company. What I meant was a "Service" company. Apple Music, iCloud , and other Apple developed services have become mainstream." Still you are out in left field if you think, or even mention Apple is a services company, or working towards services. Services still require support for other platforms. Now you must only use Apple, but Apple is about Apple and doesn't give a $hit about other platforms to even support their services on other platforms. I love how you try to take the focus off of you and the crap that you stated earlier. But you proved to the world that you are a blind Apple Zealot, who really doesn't know his head from his @$$.

posted on May 25, 2016, 11:41 PM 0

30. kiko007

Posts: 7493; Member since: Feb 17, 2016

" Still you are out in left field if you think, or even mention Apple is a services company, or working towards services. Services still require support for other platforms. Now you must only use Apple, but Apple is about Apple and doesn't give a $hit about other platforms to even support their services on other platforms. I love how you try to take the focus off of you and the crap that you stated earlier. But you proved to the world that you are a blind Apple Zealot, who really doesn't know his head from his @$$." Is Apple Music available on Android? Yes. Does it offer supported features on the platform? Yes. Game....Set....Match. There also seems to be a focus on making iCloud more diversified. Yes Apple caters to their ecosystem, unlike Google and MSFT, that is why I stated they are "trying" to become a service company. Before they can do so, they have to open pathways within other ecosystems. Just keep insulting me :-D. You're only making your argument weaker and your OS of choice (I'm assuming Android by the tone you use) look idiotic ^_^.

posted on May 25, 2016, 11:52 PM 1

32. grbrao

Posts: 294; Member since: Nov 23, 2012

Why everone talk about how much it took for manufacturing? that is the material cost together, who is gonna pay assembling chargers, tarnsport and contry import tax? All together on tops 10% profit it is gonna be like that. And do not mention the money they spend on aquiring new tech and R&D....

posted on May 26, 2016, 12:07 AM 0

33. kiko007

Posts: 7493; Member since: Feb 17, 2016

Excellent point. Apparently people think manufacturing costs should be representative of the cost of a good. However, in reality there are several other factors to consider such as marketing costs, importation taxes, etc. This adds a significant amount to the manufacturing costs, creating a massive difference were the other factors not presented. Very good point.

posted on May 26, 2016, 12:13 AM 0

4. darkkjedii

Posts: 30875; Member since: Feb 05, 2011

Or make its new hardware more affordable. Less profit per phone, but way more phones sold. India's population is huge.

posted on May 25, 2016, 8:13 PM 5

5. kiko007

Posts: 7493; Member since: Feb 17, 2016

They could go that route. There are great number of people who would like to try an iPhone, but simply can't afford a $800 dollar purchase on something so nominal. I think India's population is estimated at around 1.2 billion, that's like 1/7th of the human population. It is indeed a huge untapped market, and it'll be interesting to see how Apple approaches it :-).

posted on May 25, 2016, 8:32 PM 2

10. darkkjedii

Posts: 30875; Member since: Feb 05, 2011

Exactly! They could gain market share, and do big business. Not sure how the shareholders will take to something like that though.

posted on May 25, 2016, 9:12 PM 0

6. Subie

Posts: 2321; Member since: Aug 01, 2015

Absolutely. All the extra phones would also mean more apps being sold. The extra revenue generated there would definitely help to offset any losses per handset.

posted on May 25, 2016, 8:45 PM 0

11. darkkjedii

Posts: 30875; Member since: Feb 05, 2011

Big time!

posted on May 25, 2016, 9:12 PM 0

42. cheetah2k

Posts: 2198; Member since: Jan 16, 2011

Apple's price gouging time on hardware will have to end sooner or later. Paying $1099 for a 16gb fixed storage phone with 3 year old hardware that cost $230 to manufacture is well beyond the costs for R&D argument now.. In India's case if Apple want to sell phones over there, unless the USA have a decent FTA with India, they'll have to suck it up and roll with their demands. But of course, the typical Apple attitude will be "screw you, we're apple".. Thing is India don't take no 5h1t from any outsiders... Nek minit Apples lawyers come in and take the Indian government to court... Apple will learn and fail the hard way

posted on May 26, 2016, 5:30 PM 0

7. submar

Posts: 713; Member since: Sep 19, 2014

Overprice VS poor but huge populations.

posted on May 25, 2016, 8:53 PM 6

8. kiko007

Posts: 7493; Member since: Feb 17, 2016

Again "Overpriced" is subjective. If Apple can get away with exorbitant prices (which they can of course b/c Apple =_=) then the price is justified. Honestly if another OEM could get away with pricing their devices the same way, they would. Because iOS can only be obtained through Apple, they have literally NO competition. Android is it's own thing with it's own subsection, so a comparison between the two is very "disingenuous" at best. Just remember that because the iPhone is overpriced to you, doesn't mean it is to all :-D.

posted on May 25, 2016, 9:08 PM 0

26. VZWuser76

Posts: 4974; Member since: Mar 04, 2010

You make a good argument, except you missed his point entirely. In this setting, in India, it is overpriced. Even in comparison to the US, it's more expensive. So to argue that overpriced is subjective is wrong in this case. People in a country that is poorer than the US are paying more than people do in the US for the same thing, that's overpriced plain and simple.

posted on May 25, 2016, 10:58 PM 6

27. submar

Posts: 713; Member since: Sep 19, 2014

You make a point. Price of iPhones (which is already expensive) is even higher in poorer country when compared to rich country like US.

posted on May 25, 2016, 11:11 PM 1

29. kiko007

Posts: 7493; Member since: Feb 17, 2016

I don't necessarily think Apple is responsible for the increase in pricing though. However, I see what you and OP are saying.

posted on May 25, 2016, 11:41 PM 0

41. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

Overpriced is not subjective. It's either you can afford it, or you can't. Fcat is over 90% of India can't afford an iphone. That are not alone as this is the same for most Asian countries. After all, just look at the market-share of Apple in these countries. Please understand, the average income of a Filipino for example, on what is considered a good paying job is a month salary that is equal to $350USD. if you only make $350 in 30 days, and you pay rent, utilities, food, clothing and transportation and more, what do you think will be left for a phone? You fools always take for granted you live in a country where money isn't an issue. Remember living in a rich country doesn't mean everyone is rich. The US has just as many poor people as many places in the world. If we didnt have a system of debt/credit, most people here in the USA wouldn't have an iPhone either. Understand that other countries have a different credit system. It's called collateral. Whatever you are buying, if you need time to pay for it, you need to put something up for collateral. In some cases, people use their own lives for money.

posted on May 26, 2016, 4:28 PM 3

43. cheetah2k

Posts: 2198; Member since: Jan 16, 2011

The Fcat 90% situation is exactly why companies like Samsung have $99 phones all the way up to $999... No doubts they sell 99% of the cheaper priced phones, vs the upper end 1%.. Market "pricing" demand is where Apple will fail.. No one is going to spend 6 months worth of salary for a 16gb 6S, when they can get a low end Samsung for 2 weeks salary that will do pretty much everything they want - and with dual sim cards.. Even the iPhone SE is overpriced for India.. Apple will learn and fail the hard way

posted on May 26, 2016, 5:36 PM 0

17. Tejas9

Posts: 95; Member since: Feb 02, 2015

Being an Indian citizen in one of the most important cities of India, let me tell you how much Apple really sells here. I live in Pune, Maharashtra, one of the highest tax paying city in India. Mostly people here can easily afford an iPhone but do not buy one as we people tend to look for 'value for money first'. Secondly, the compatibility factor is on our mind's a lot. You see mostly people here use a Windows based PC & we all know how notorious iTunes can be. Mostly, everyone doesn't like to hook up to an PC just for making all small changes now & then. No proper multitasking, just that logo does not mean a lot here. But let me clarify one thing, as all over the world mostly people or teenagers buy iPhones, same here in India. It is mostly used by teenagers or by old people. Rarely I see an iPhone here & there. But on the other hand the s7edge, s6edge+, Xiaomi note series or Motorola even Oppo is sought after a lot. Apple products are simply not appealing to lot of Indians due to its high price get less features. Now, I don't want fanboy fanaticism. It is my honest opinion, my friend here has one of the most highest selling shop mobile shop in our State & we both have discussed a lot on what the customer wants.