Apple To Boost Make In India: Aims $40 Billion Phones In 5 Years To Become Largest Exporter

The COVID-19 pandemic has surely shaken the entire world. It has even affected the profit-hungry businesses to look for alternative places for conducting their manufacturing business.

Reuters

Many are even considering India as their next big option. And the company next in line to do so is none other than iPhone maker Apple.

According to a report by ET, Apple executives have been in discussions with top-ranking government officials over the last few months to look at a possibility of shifting around a fifth of its production capacity from China, all the way to India, with the help of contract manufacturers.

This is according to a senior government official in a conversation with ET. He said in a statement, ¡°We expect Apple to produce up to $40 billion worth of smartphones, mostly for exports through its contract manufacturers Wistron and Foxconn, availing the benefits under the production-linked incentive (PLI) scheme.¡±

If this actually were to happen, Apple could become India¡¯s largest exporter, according to experts.

Reuters

While it might seem perfect for India, the report states that there are several obstacles in the way -- primarily with the government¡¯s PLI scheme that essentially incentivises local handset manufacturing and exports. The fine details of the scheme are yet to be finalised.

The official stated, ¡°There are some problems with some of the clauses. For instance, valuing the entire plant and machinery already in use in its plants across China and other places at 40% of that value and the extent of the business information sought under the scheme are some of the irritants.¡±

As per market research by IDC, Apple in the year 2018-2019 has held a 38 percent market share of smartphone exports in India, followed by Samsung at second spot with 22 percent market share.

What¡¯s in it for India?

As of now, Apple sells around $1.5 billion worth of phones in India, from which only $0.5 billion are manufactured locally while retaining a market share of just 2 to 3 percent. On the other hand, Apple is the biggest investor in China where it has produced goods over $220 billion and exported $185 billion of it. It also employs (directly or indirectly) close to 4.8 million people in China alone.

If Apple or other smartphone brands start making devices in India, not only will it provide us with employment opportunities, but the government too will get revenue. Also, since the devices will be made in India, we can expect them to be cheaper than the imported units.

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Tweaking the PLI scheme to make a tempting proposition

According to another senior official in conversation with ET, India wants a bigger slice and has tweaked the PLI scheme in a way to address the problems that brands face while manufacturing in India, compared to China or even Vietnam.

The PLI scheme which was notified on April 1st offers production-linked incentive to boost domestic manufacturing while also attracting large investments in making smartphones, along with specified components like Assembly Testing, Marking and Packaging Units.

Reuters

The official explained, ¡°We realised companies weren¡¯t relocating manufacturing to India because there were disabilities of almost 10%, so PLI addresses about 6% disabilities, the RoDTeP scheme another 0.27%, and the corporate rate tax cuts address the balance.

The scheme states that the company must make at least $10 billion worth of phones in a phased manner from 2020 to 2025 to be eligible for benefits of the PLI scheme. The manufacturers will have to meet targets on a yearly basis.

Attracting not just Apple but also other players

Government official states that they¡¯re expecting companies to start applying next week after the guidelines are out. Not just Apple, but Samsung, as well as Chinese phone makers like Vivo and Oppo, are expected to apply for the same.

The scheme goes into effect starting August 1st this year. They also state that it has been the fastest ever ¡®planning to execution¡¯ undertaken by the Indian government.

¡°With such incentives, we expect mobile phone exports out of India to cross $100 billion by 2025, it could be earlier than that.¡±