An Indian government official has revealed plans for Apple to start manufacturing iPhones at a new facility in Bangalore, which may commence operations as early as April.
Priyank Kharge, Minister of IT for the Indian state of Karnataka, said on Twitter that Apple's plans would "foster cutting-edge technology ecosystem and supply chain development" for Bangalore. The state also issued a statement welcoming the iPhone maker's move to begin "initial manufacturing operations".
Taiwanese contract manufacturer Wistron had been roped in to drive the production in Bangalore, which Kharge said would make the Apple smartphone for the local market. The minister told Bloomberg he met with the company's representatives last month, confirming that production at the plant would begin by end-April.
Apple shipped 2.5 million iPhones into India last year, while some 78.3 million units of the smartphone were sold globally in the fourth quarter of 2016.
The vendor's other manufacturing partner, Foxconn, operated several facilities in its domestic market China, with Apple generating half of its parent Hon Hai Precision Industry's business.
India bypassed US last year to become the world's second-largest mobile market, after China. It was estimated to have more than 300 million smartphone users, with this number projected to hit 810 million by 2021.
The Indian government in May rejected Apple's application to sell refurbished units of iPhone and iPad in the country, saying this would violate its Hazardous Waste Rules and generate e-waste. It did, however, relaxed local sourcing policies to allow Apple to open retail stores in India, where it currently sold its products through local resellers.
According to local laws, foreign entities looking to set up shop in India must sell products containing components of which at least 30 percent were sourced within the Asian country.
Several mobile phone makers already operated production facilities in India, including Chinese vendors Xiaomi, Lenovo, Vivo, and Gionee as well as Korean smartphone giant Samsung. According to IDC, more than two thirds of smartphones shipped in India were assembled within the country.
India turns down Apple's request to sell refurbished iPhones in the country
In a setback to the efforts of Apple Inc, the Indian Ministry of Environment and Forests has decided not to allow the US smartphone maker to market its refurbished iPhones and iPads on the grounds that it would be in violation of the Hazardous Waste Rules 2008.
The Technical Review Committee (TRC) in the ministry has reportedly turned down an application filed by Apple in December pointing out that it would add to the mounting e-waste in the country. "The Central Pollution Control Board has estimated that as much as 800,000 MTs of e-waste was generated in 2005," Indian Minister for Environment and Forests Prakash Javadekar informed the country's law makers 10 days ago.
In a statement in Parliament made in early March, Indian Minister for Communication and Information Technology Ravi Shankar Prasad confirmed Apple's request to sell pre-owned iPhones imported from China in the country but said that the government has not taken any decision so far.
The development is a sort of embarrassment to Prime Minister Narendra Modi, who, during one of his visits to the US, personally invited Apple's CEO Tim Cook to set up a manufacturing facility in India. The latter agreed to the request.
According to a report in an English daily Indian Express, the US firm tried in vain on an earlier occasion to seek permission to import 1 lakh used iPhones and 2.5 lakh iPads to explore the "refurbished electrical and electronic equipment" market, but the requested was turned down by Environment Ministry's TRC on July 2 last year on the grounds that it would add to India's e-waste.
Quoting TRC sources, the report further said: "Refurbished electrical and electronic equipment had shorter functional life and became obsolete quicker, thereby amplifying the country's e-waste burden. At best, it reasoned, imports that were of less than three year vintage with at least five years of residual life could be allowed."
However, Apple has claimed in its application that its CPO iPhones were not "standard refurbished mobile phones" as they are made by its original equipment manufacturers and follow the same manufacturing and quality assurance processes as for new devices, the report added.
They were not second-hand phones as they went through the same standards of quality and testing as new ones; carried the same one year warranty; and bore a new serial number and IMEI number. Claiming that it maintained high standards of e-waste management and recycling, Apple said that by allowing CPOs -- which were as durable as new iPhones -- India could replace the low-end mobiles, including smartphones, and prevent e-waste generation and landfills.
Apple's keenness to make inroads into the Indian market is understandable, as while the Chinese market reached saturation, the sale of smartphones in India was close to 100 million in 2015. While the sale of iPhones in the first quarter in China fell by 11 percent, the same increased in India by 56 percent.
However, the Indian government's decision is unlikely to impact Apple's plans to set up atechnology development centre at a cost of $25 million in Hyderabad in the coming months.
"Since the centre will not be engaged in manufacturing iPhones, there should not be any change in the company's plans," an official with knowledge of the matter told ZDNet.
Apple's representatives are waiting for the Indian government's clearance to start work on the project, which is expected to cover an area of 250,000 square feet in the real estate firm Tishman Speyer's WaveRock facility located amidst the IT corridor in Hyderabad. Apple is planning to develop maps and make them available in its iPhones and Mac systems in the proposed centre.
India aims to become global hub for manufacturing smartphones
With the Indian government determined to promote local manufacturing in 25 sectors including electronic equipment, around two dozen new smartphone assembling units have been established by various companies in less than two years in India, as part of Prime Minister Narendra Modi's "Make in India" campaign launched in September 2014.
According to International Data Corporation's (IDC) Quarterly Mobile Phone Tracker report released last week, more than two thirds of the smartphones shipped in Q1 2016 were assembled within the country and some of the companies, which are currently assembling mobile phones locally, are likely to start manufacturing components like batteries, chargers, and data cables, owing to support from the federal and state governments.
As many as 23.5 million units of smartphones were shipped in India in Q1 2016, registering 5.2 percent growth over the same period last year. "4G based smartphones shipments clocked 15.4 million units in Q1 2016, which has grown more than six times over the same period last year," the report said.
The two dozen companies that are engaged in assembling smartphones include Chinese phone makers Vivo and Gionee -- which have set up assembling units in Greater Noida near Delhi and in Andhra Pradesh respectively -- and Samsung, also in Noida. Others such as Xiaomi, Motorola, and Lenovo too have set up their plants, while South Korea's LG Electronics is looking for a suitable place to establish a local component base for its business in the country.
One of the reasons why Apple is interested in establishing its manufacturing facility in India, according to the IDC report, is that smartphone penetration has been only 30 percent at present and there was good scope for other companies to set up units in the country.
However, smartphone shipments shrank by 8.2 percent over Q4 2015, dipping consecutively for two quarters, but the market is expected to gain momentum in the upcoming months, the report said.
Indian Cellular Association associate director Bijesh Roul said that India was on its way to become a global hub in manufacturing smartphones because of the support extended by the Indian government and also due to the investor-friendly policies adopted by various states.
Some of the advantages for these companies to establish their units in India include the provision of capex subsidy and also the reduction in excise duty. "The Chinese companies are also looking at India as manufacturing has become expensive in their country whereas it is cheap here," Roul explained.
There has been 185 percent growth in terms of value in mobile manufacturing sector in 2015-16 compared with the preceding year and the "Make in India" initiative also helped the creation of 40,000 jobs in the mobile phone manufacturing sector in the country last year, Roul added.
Karthik J, senior market analyst for Client Devices at IDC India, said that India was mainly into assembling semi knocked down (SKD) mobile phones than end-to-end manufacturing of mobile phones in countries like China and Taiwan at present.
"However, a few quarters down the line, when India enters the 'completely knocked down' (CKD) and component manufacturing era, India would emerge as a global mobile phone manufacturing hub catering to the demand of other South Asia and SEA markets in the Asia-Pacific region," he said.
He said that there were at least 25 smartphone vendors engaged in assembling SKD mobile phones in India. "With the recent hike in the import duties on the components, it is clear that government is expecting mobile phone vendors to move from SKD to CKD/component manufacturing phase soon. Few big vendors are also considering moving into CKD manufacturing given the volume of the market," Karthik added.
"We expect many transitional phases to unfold in the mobile phone ecosystem this year as more vendors begin local assembling/manufacturing and an increasing trend for higher data consumption owing to affordable 4G devices and data plans," said Navkendar Singh, senior research manager, IDC India.
According to him, smartphone penetration is still at less than 30 percent in the country which makes it one of the most attractive markets in the world. "While the new entrants continue to make the Indian mobile market more competitive, vendors differentiating themselves with value added services could be expected in this year," Singh added.