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.
Apple prices based on demand curves, not supply costs.
For example: a 64 GB iPhone X is currently selling for around 1100 dollars.
Import duty on iPhones is 18% and 28% on iPads as of 2015.  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!
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.
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 %.
Quite a few countries have car industries which work roughly like this -- the local VW plant will cost twice as much to run (per car) as the mothership, roughy matching a 100% import tax. (Although in reality there is often more to the story, like producing exactly one model there & exporting those for credit against imports...)
Then there is 12% tax on top of that.
That isn't right. The iPhone X costs (just under) 1,00,000 INR retail in India, which is over 1400 usd.
This includes taxes.
For reference: https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io&
I live in Sweden, and the pricing will go like this:
- The US: $999
- The EU: €999
- Sweden: 9900 SEK
Depending on currency rates, it can become up to 30% more expensive.
My favorite discovery was around the time of the trashcan MacPro. It was cheaper to fly to New York, buy the Mac, and fly back than
to buy one in Sweden. And you would still have money left over.
It makes no sense comparing US and EU prices directly, as the former are always shown without VAT (which varies state from state), and in the latter the VAT is included (which is specific to each country).
Also, price will fluctuate even across EU countries, on account of different VAT taxes in the individual member states, so that Apple "keeps the same digits" it is simply not true, as a rule:
iPhone X 64GB USA(no VAT): 999$
iPhone X 64GB Italy (VAT 22%): 1189€
iPhone X 64GB Spain (VAT 21%): 1159€
The only way to compare them is to remove VAT, for example in the case of Italy:
1189/(1+0.22)= 974€ -->> 1100$ (current exchange rate).
So, there is about 10% difference, which could be (partly) accounted for due to the different warranty requirements in EU.
EDIT: Fixed math
I'm afraid 'Apple charges more abroad' is largely a fallacy. Where there is a difference, it's almost always pretty clearly due to local taxes or costs of doing business. This used to really piss off Steve J because he saw it as terribly unfair.
If you factor in sales tax on the US side, you also have to factor in VAT on the EU side, since they are equivalent.
So that 10% difference is correct.
VAT ranges from 17% to 27%.
US price has no sale tax (which varies per state and county)
To sum up: if you find the goods at any retailer in the EU, buy them online and pay for the delivery - for light products (electronics), the shipment costs are low when not 'free'.
>>but the price is to be a bit higher due to VAT diff.
Sweden has 25% which is pretty high, compared to the 19% Germany.
They do not always use the round numbers.
That's why you get certain allowances of how much you are allowed to bring back with you - say up to 200 cartons of cigarettes are free to bring over and that's clearly not something that you brought with you.
> Other goods (including perfume, coffee, tea, electronic devices etc.)(a) - Up to a value of €430 for air and sea travellers
If you travel to the USA for a week and buy something, that's subject to import duty.
But that doesn't mean it will become affordable, Apple has positioned itself as a luxury brand & is said to have the largest markup among smartphone manufacturers.
Indians looking for cost/value will always have better alternative, but for those 'Who value themselves upon what others see in their hands' will burn lesser cash than before.
I might be wrong but, I think, OP might be referencing to the fact that phones manufactured in India are exempt from import tarrifs (cross trade avg of around 14%).
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.)
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.
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.
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.
Its not about market size today, you have to look into the future as well.
Volkswagen, Mercedes-Benz and others are making essentially the same play. They must see a valuable enough market to warrant that kind of investment.
It is just the result of protectionism.
The goal is usually to encourage local firms to grow and compete, and sometimes that happens (e.g. Hyundai). But sometimes the local firms become complacent in their walled garden (e.g. Hindustan Motors).
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.
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.
According to the latest market research  in China, IPhone are mostly used in China by undereducated people with relatively low income, people with decent education & job mostly use Android phones.
This is consistent with what I see on daily basis - almost all my friends & coworkers use MacBook Pro + Huawei/Xiaomi phone. If I try really really hard, I can probably eventually list 1-2 friends & coworkers who use iPhone, but like I said, I need to try hard to recall that.
Rich countries as well, lot of pharma drugs sold in the US come from India.
There was a time when the British destroyed the textiles trade in India and made everyone buy stuff made in Manchester. Before that India had 25% or so of the global market.
With a billion or so people living in the sub-continent there should be an indigenous mobile phone and eco-system that suits the market better than what Silicon Valley can provide. China can do it, Europe used to be able to do it. It is not as if India is short of highly educated software engineers. If, instead of everyone in India having an Indian mobile phone, everyone has an iPhone then everyone is going to be sending off a portion of their wealth off to Cupertino (even if that money ends up in off shore tax havens).
There are national security issues with this, regardless of how well Apple claim they are on the side of privacy. Just for sovereignty reasons the Indian government should be using heir own tech instead of providing incentives for Apple to set up shop.
why would it matter where you're sending a portion of your so-called "wealth" when you're getting something in return?
considering the horrific state India is in (high corruption, high poverty, low healthcare, no infrastructure, you name it), the location of where an iPhone is produced should literally be the last thing the government cares about.
maybe the value of the potential taxes are too much for the government not to stick their hands in?
Every dollar that leaves India, Nigeria or any other developing country is one less dollar that can pay for jobs (plumbers, electricians, doctors etc) in the local market.
South Africa used to have very restrictive currency export controls partly due to apartheid-era sanctions, and one consequence is that it stimulated domestic production and innovation, perhaps far more than any other African country. They’ve now relaxed those controls but it is arguable that they were necessary at that stage of their economic development.
Perhaps the "wealth" you're sending and what you're getting back are qualitatively different and you have reason to prefer one over the other. Or even more simply, perhaps what you're getting in return isn't worth more than what you're giving. As an aside, in the philosophy of exploitation, it is entirely possible for exploitation to exist even if both the exploiter and the exploited benefit in some way in the transaction.
You missed jobs in that statement, Iphone factory brings jobs directly and indirectly in that region. Try looking at the big picture.
Tata now owns a whole slew of British auto companies in Jaguar/Land Rover. So, despite these horror stories of corruption, someone in the Indian auto sector is doing something right.
I don't see why, given the market size, that India can't have its own full stack of mobile phone tech, operating systems, apps and everything else. Why settle for crumbs from the Apple table? Why settle for a few jobs for the profits to go back to Cupertino? The Tata Steel example is proof that dreams don't have to be downsized and that countries have to be beholden to American corporations.
You may have the luxury to say that, lot of Indians dont. They need that job.
At least in the context of the last few generations, this is not an unusual avenue to globalization. It's pretty much the template followed by auto manufacturing as it globalised, for example.
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?
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.
Yes it is. And it has paid off well for India and it's people.
> India by comparison is a disaster. You don't even know which official to bribe to get the power to stay on properly. Almost more trouble than it's worth to enter that market.
There are hundreds of thousands of factories already set up in India. India has almost all the major car companies manufacturing here, there is Samsung with its biggest phone manufacturing plant in the world, I think almost all of Xiaomi's phone sold in India are made in India. With a market as big as India's, a company as big as Apple can surely figure out how to navigate through the process.
It is called SEZ or Special Economic Zones in India. Take some time and read up on it first before coming to wrong conclusions: https://en.wikipedia.org/wiki/Special_economic_zone#India. It has been around for multiple decades now. It isn't some new concept. All MNCs are situated in SEZs be it Google, Facebook, Microsoft or now Apple. Apple is the latest entrant and not first by any means.
This is a ridiculous assertion based on heresy with no evidence to back it up. Ease of doing business has increased drastically in the past few years. Multiple foreign companies have setup shop in India and some have been in India for decades now (Microsoft, Google etc). I can understand if you had compared India to a Western country but comparing it to China? Are you serious?
If India was really such a "disaster" compared to China why did Google quit China and not India? Does that in itself not invalidate all your points?
Also, coming to your "bribe" issue: do you mean to say "lobbying"? Because bribing is almost non-existent in India when it comes to operations of MNCs. You need to "lobby" for laws that favour MNCs. That has been the case for a long time in India now. But lobbying is also dying since Modi took over. You now have to come through the "Make in India" route. All foreign players are actually happy with it because there is zero red tape and all processes are fast-tracked. No need to lobby with anyone anymore and just focus on building and expanding your business. The issue for India was that it took this route too late (after many decades of extreme protectionism).
I don't know where you get your information from but it is high time you change your source.
Oh dear. Thats patently false.
Major manufacturing usnits get their own dedicated connection along with own local grids. The power situation for large industries is as good as it gets. Smaller industries and consumers may get the shaft in some areas but this is never the case for the big ones in major manufactiruing areas.
What? Where are you reading this? And why would you even believe it so readily? One quick Google search has the entire page full of news articles complaining of poor working conditions. Moreover, I highly doubt that the regional governments in China would aid in bettering the working conditions at manufacturing plants of an outside company, when they can't help their own workers out of the "996" work schedule .