Apple CEO Tim Cook stated in the latest quarterly earnings call yesterday that Apple continues to be “very bullish and optimistic about India,” as the company continues to invest in the country. Additionally, the company has also requested the Indian government to extend tax incentives to its suppliers in order to make India a manufacturing hub for iPhones and its components.
While the company reported a global revival of the iPad business, steady sales of the Mac, and better than expected iPhone sales, Tim Cook reaffirmed that the company hasn’t forgotten about the emerging markets.
Reminding analysts that it recently began assembling the iPhone SE model in India, Tim Cook stated, “We’re bringing all of our energies to bear there,” he said. This is the first time that the company began to locally manufacture the iPhone units in India.
He also added, “We have already launched our App Accelerator, that’s on top of working with the channel and looking at expanding our go-to-market in general.” The tech giant had opened the proposed App Accelerator announced by Tim Cook during his India visit last year in Bengaluru in April this year. It had been announced by him in May 2016. The initiative is aimed at supporting engineering talent and accelerating growth in India’s iOS developer community.
Tim also added that he sees a lot of similarities in where India is today compared to where China was, just a few years ago. China is the world’s largest smartphone market, while India is the second-largest. However the country is still a challenge for the company given that majority of smartphones sold in the country are priced under $150.
It is this pricing conundrum which Apple aims to address by seeking tax breaks for its suppliers in India.
Why Apple Seeks Tax Incentives In India
The US tech giant has been in talks with Indian officials since the last couple of months. In December 2016, it had reportedly appealed to the Indian Government to relax labelling rules so that it doesn’t have to print product-related information directly onto devices.
Now the company has asked the Indian government for its policy review and to extend tax incentives to its suppliers. The two have been discussing a list of “prerequisites” that the company submitted last October. These include duty exemption on raw materials for manufacturing components and capital equipment for 15 years.
Apple has told the government it would be bringing in a host of ancillary units when it sets up operations to cater to India. The company has been in talks with Indian officials since May of last year, when Tim Cook and Prime Minister Narendra Modi agreed to set up a production base in the country that goes beyond just assembling the devices.
While this could be a big win for the Indian Government’s Make In India campaign, it could take some more months for the government to review the appeal. Since customs duties have already been slashed in order to make India a hub for handset assembly lines, the government cannot change the duty structure just for one company. However, if granted, it will also benefit others such as South Korea’s Samsung Electronics and China’s Oppo and Xiaomi, both of whom currently have predominantly assembly operations in India.
For Apple, it could open the door to India’s burgeoning smartphone market, given its growth in China slid 14% year-on-year to $10.7 Bn in the three months ended April 1, 2017. Meanwhile, India’s smartphone market is expected to grow to reach over 500 Mn customers in India by 2018. By seeking tax incentives, Tim Cook is pinning his hopes on penetrating deeper into India to make the nation its next growth market.
(The development was reported by Reuters)