Apple in India

In May 16, Tim Cook, CEO of Apple, met PM Narendra Modi to look into the possibility of ‘make in India’ – Apple products. Apple struck a deal in October 16 with Reliance Jio. As part of the deal, Apple customers get complimentary Jio Digital for 12 months. Jio plans to roll out 4G coverage in 18000 cities and 200,000 villages.  

Can Modi meet Apple’s demands?

In May 16, Tim Cook, CEO of Apple, met PM Narendra Modi to look into the possibility of ‘make in India’ – Apple products. Apple struck a deal in October 16 with Reliance Jio. As part of the deal, Apple customers get complimentary Jio Digital for 12 months. Jio plans to roll out 4G coverage in 18000 cities and 200,000 villages.  

What does Apple what from India?

  • Apple sees India as a big market after China. But, China has a per capita income of $8000 whereas India’s per capita income is only $1600. 
  • Apple is seeking a 15-year tax holiday on imports of components and equipment.
  • Apple doesn’t manufacture devices itself, but partners with contract manufactures to handle the capital-intensive demands of building factories and hiring staff. Apple plans to partner with Taiwan’s Wistron Corp, based in Bangalore.

Analysis

In 2016, though Iphone sales increased by 50 percent, its market share fell from 4.5 percent to 2.4 percent due to competition from low-cost Android alternatives. Iphone’s latest model cost around $1000 whereas the average smartphone in India costs only $158. Apple products cost more in India than in the rest of Asia, by nearly $200.  Price will be a key component for Apple to do well in India. 

Siri, Apple’s virtual assistant speaks in Mandarin, French, Arabic and more, but can’t converse in Hindi or other Indian languages. Language barrier is another challenge to be tackled to ensure penetration in Indian market. Only 125M speak English in India’s 1.3B population. This challenge is tackled better by Google Assistant, which operates in over 20 Indian languages.

Assessment

Historically, the government has given no such concessions to any company and there is little room in government policy to do so. PM Modi, being a decisive leader as demonstrated by demonetization, may find provisions to allow the concessions. However, such incentives will result in other companies such as Samsung Electronic Co. and local player Micromax Informatics Ltd seeking similar incentives at additional cost to the government.

 

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