
Mass Production of iPhones to Start in India - sarthakjain
https://www.bloomberg.com/news/articles/2019-04-15/foxconn-is-poised-to-begin-mass-production-of-iphones-in-india
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deepGem
Man, finally this came along. Apple had been negotiating for almost 3 years to
setup manufacturing in India. Foxconn got a start in the outskirts of
Bangalore where they manufacture iPhone SEs.

I as a customer am super glad this is coming along. Tired of paying a premium
for Apple products in India. In addition to iPhones I seriously hope they
start iPad manufacturing as well. IMHO iPads will probably have a better
success rate in India once the prices reach parity with US.

~~~
hodder
What makes you think you will not pay a premium for iPhones in India in the
future?

Apple prices based on demand curves, not supply costs.

~~~
finebalance
India has a really high import tax on electronic items. Even if Apple charges
a slight premium over its US prices, it's still going to be significantly
cheaper than what it currently is.

For example: a 64 GB iPhone X is currently selling for around 1100 dollars.

~~~
arcticbull
Or they keep them the same price and make even more impressive margins.
There's a reason they have 87% of the world smartphone profit share [1] and
it's not because they're giving them away or passing on the cost savings to
their customers.

Import duty on iPhones is 18% and 28% on iPads as of 2015. [2] Wealth
inequality in India is pretty high (not as high as in the US, though, GINI
35.6 vs 40.4), and it's GDP per capita is just $1,939. Per your data, they're
currently charging $1,100 which is a whopping 57% of GDP per capita.

My gut tells me reducing the price of a super-luxury good by 18% won't
increase demand enough to make up for pocketing the 18% savings. That would be
like pricing an iPhone at $33,000 in America. I can't imagine reducing the
price to $27,000 would dramatically increase the number of buyers. Or a Rolex
from $100K to $82K.

I guess we'll see!

[1] [https://www.forbes.com/sites/chuckjones/2018/03/02/apple-
con...](https://www.forbes.com/sites/chuckjones/2018/03/02/apple-continues-to-
dominate-the-smartphone-profit-pool/#1b332c1b61bb)

[2] [https://www.labnol.org/india/custom-import-
duties/19306/](https://www.labnol.org/india/custom-import-duties/19306/)

~~~
simonh
Apple's market share in India is about 2% while in China it's about 7 percent.
Apple's profit margin is generally about 30%.

The import tax in India is now 20%. Lets suppose Apple could increase market
share in India to match that in China by reducing prices by the 20% tax, and
compare that to keeping the 20% as extra profit but not increasing market
share.

2% market share on 50% profit margin (existing 30% margin plus tax margin of
20%) sounds pretty good. However 30% profits on 7% market share yields more
than double the overall profits.

Finally, all the arguments you make for charging more apply equally well
anywhere in the world. So why doesn't Apple charge India prices everywhere in
the world already? A simple argument that increased profit margin always beats
higher sales implies that the perfect price point is infinity. At some point
this strategy must yield diminishing returns.

~~~
glogla
> Finally, all the arguments you make for charging more apply equally well
> anywhere in the world. So why doesn't Apple charge India prices everywhere
> in the world already?

They kind of do, except they're slowly easing into it. First iPhone was 499
USD for the base model. iPhone X was 999 USD for the base model.

So over 10 years, they slowly raised their prices 100 %.

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contingencies
Trying to interpret this.

First of all $300M isn't a lot of money for this sort of operation. I guess it
barely buys a good line of equipment, installed with an operable workforce, if
that. Secondly, the amount of manual labour in iPhone assembly has to be
pretty minimal with respect to margins. Can anyone enlighten us to the
management situation?

I guess perhaps the true story behind the 'asserted' transition to an
additional base in India includes other factors like: freeing Foxconn capital
from China (currently their largest production base, with rising costs, a
slowing market and perennial foreign exchange hassles), gaining additional
internal production operations experience within a foreign non-'Chinese' (ie.
Taiwan/China) environment, and cross-jurisdictional legal/tax/tariff/exchange
rate hedging. (The US-China trade war has to have scared the pants off anyone
in a consumer electronics this heavily.)

~~~
NTDF9
It's a logistics/risk balancing/new demand move.

1\. Logistics: Cheaper to ship to rich Middle east and maybe even Europe

2\. Risk balancing: With uncertainty at political levels about tariffs and
trade rules, it makes sense to distribute production to multiple places in the
world.

3\. New demand: Lower cost of production == lower prices in India. Apple has
negligible penetration in the largest fastest growing market. This move is a
bet to try to beat android competition in price and raise global demand for
IPhones.

Honestly, this move is a no-brainer. The benefits are endless.

~~~
Ayesh
I think Apple is pretty late at this point. Xiaomi and Oppo have figured out
the distribution, localization, and a sizeable user base already there, and a
decent smart phone now costs $150-200. They are quite good phones and from
what I understand, price is the biggest driver for sales.

~~~
itissid
But apple is a luxury brand. You can't say that with Xiaomi or Oppo. With
luxury brand the price is not a bug but a feature for the people that swear by
them.

And Rich people don't even care about the money. the 50-100 million rich
people in india are least bothered about the price tag as long as it signifies
luxury and status.

~~~
jpatokal
Xiaomi is a luxury brand in the Chinese market.

And rich by Indian standards doesn't mean they can afford to spend over $1000
on an iPhone: in India, a top 1% household earns only about $1000/month.

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eyeareque
My guess is that they are only doing this to meet the local restrictions in
order to open stores, avoid extra taxes inside of India.

------
_pmf_
Good for everybody when knowledge to produce high end electronics at scale is
not exclusive to China.

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outside1234
India should demand that the Chinese firm share their manufacturing
techniques.

~~~
caymanjim
Foxconn is setting up the manufacturing. I'm sure they intend to share the
techniques with themselves.

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lawrenceyan
Pretty meaningful change. Hopefully the advent of this will result in
increased social mobility and the rise of a homegrown hardware technology
industry in the coming years.

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ulfw
This is so against globalisation and global trade it‘s not even funny. Totally
cool if Apple did this voluntarily, but the only reason they‘re doing it is to
prevent high import taxes.

India is a huge market. So it‘s all good. Brazil is a good deal smaller and
requires the same thing. So does Argentina (and is even smaller). Now imagine
every country would do this.

~~~
Alterlife
In some ways, every third-world country in the world SHOULD do this. I say
this as an Indian iPhone user.

iPhones are a luxury product. A tax on imported high end electronics is a tax
on the well-off. Not only that, it's the best kind - a tax that an end-user
can choose whether or not they want to pay.

~~~
tonyedgecombe
In most ways they shouldn't, poorer countries have been doing rather well out
of globalisation. If trade wars started all over the world they would suffer
the most.

~~~
sumedh
> poorer countries have been doing rather well out of globalisation.

Rich countries as well, lot of pharma drugs sold in the US come from India.

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luminati
Do you know if these phones will be exported to the US or just for domestic
consumption in India?

Also how "complicated" is the manufacturing? Is it just lsat-mile assembling
of all pre-made components shipped in from the US, China, Germany, et al. or
the same technical processes and complexity that goes on in one of these
Chinese plants that pump out the iPhone X, XS and XS Maxes?

------
happybuy
This illustrates why all of those stories[1] about why Apple can't manufacture
in the USA are relatively hollow.

Apple doesn't manufacture in the US as they are not forced to manufacture in
the US. If they were, they'd make it happen and work-around any issues, just
as they have in India.

Apple doesn't want to manufacture in India (via Foxconn) but the Indian
regulations and government didn't budge which forced Apple's and Foxconn's
hand. Result: Apple/Foxconn is now making iPhones in India.

If the US citizens stood up for their own interests more, then there would be
a Made in the USA iPhone... perhaps more expensive than a China made one, but
Apple may decide to absorb the margin hit to retain marketshare in their
largest market.

[1] [https://www.theverge.com/2019/1/28/18200330/why-apple-
cant-m...](https://www.theverge.com/2019/1/28/18200330/why-apple-cant-made-in-
america)

~~~
tinus_hn
However there would be a lot less choice because not all Android phone
manufacturers are going to bother and the prices are going to go up because of
less competition and higher costs for everyone. Also consider that other
countries are going to respond to this kind of protectionism which is not
free.

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sreejithr
Hopefully, sane-priced iPhones in India I guess. I'm interested now.

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kristianp
Will there be repercussions from the US Federal government about this?

