By: Nandagopal Rajan
In the past few days there have been reports suggesting that Foxconn will start making Apple iPhone in India. The story stems from Maharashtra industry minister Subhash Desai’s invite to the Taiwanese smartphone maker to set up shop in India. But it is more wishful thinking than anything else on the minister’s part. Here is why Apple iPhones won’t be made in India in the near future.
1) Apple has made it clear time and again that India is not such a big market for it. It is not even in the top smartphone makers in India and that is a good reason why it does not need a manufacturing unit in India. Though manufactured by Foxconn, it will be Apple’s decision where it wants to make the phone. With all its focus being on China at the moment, it is unlikely it wants to open a new front in India. Any way, China is just next door, if the demand arises.
2) In fact, the whole of south Asia is a budget phone market and not really big enough for Apple to start its first production set up outside China. Apple’s demand from the whole of SAARC won’t add up.
3) Foxconn has already burnt its fingers in India with the shutdown of the Nokia Chennai plant. Now known as FIH India, the company is already stuck in litigation with laid off employees at its Sriperumbudur after the company shut shop in February 2015, without “following any of the mandatory procedures under the Industrial Disputes Act” according to its employees. It won’t be that easy starting new plants without settling old disputes.
4) Also, there is the question of what the advantage will come of making the iPhone in India. If the company goes ahead and does this it could gain around 11 per cent on duties. If Apple decides to transfer this benefit to buyers, it could make the phones about Rs 5,000 cheaper. Hardly worth it for either Apple or its kind of buyers.
5) It might make much better sense for Foxconn to start production for other brands, especially the Indian ones. That will make it viable for its India clients than setting up assembly lines of their own. And with the kind of numbers these players deal in, it will be a better deal for the Taiwanese ODM too.
With most Indian and Chinese brands thinking of taking benefit of the skewed duty structure to improve profits, it might make sense for Foxconn to set up some manufacturing as well as component plants in India. But to get Apple to agree to manufacturing their premium phones in India might be a bit of a stretch.