All began in earnest in 2013. After over two decades of relying on China’s low production costs and vast consumer market, western companies began to realize that ‘Made in China’ may not be sustainable in the long term. Thus began the consideration of the necessity to search elsewhere.
The Covid-19 pandemic strengthened the companies’ awareness of the dangers of relying solely on one country for their procurement and production operations.
As the Chinese dividend began to decline, India was promoted as a substitute. However, Indian policymaking has long been plagued by inconsistent policies and red tape, among other problems. As a result, businesses favored nations such as Thailand, Vietnam, and Indonesia.
In an effort to improve the convenience of doing business in India, the government headed by Narendra Modi has been modifying regulations, making the country an attractive investment destination and a formidable alternative to China.
Apple has placed a significant wager on India since beginning iPhone assembly there in 2017, in accordance with the Indian government’s drive for local manufacturing.
Apple’s India stores: A difficult path
Even after 2014, establishing a business in India, particularly for a foreign company, is a cumbersome process.
ET reported in June 2016 that Apple had no plans to establish stores in India if the central government did not exempt the company from procuring local materials. Under the then-applicable FDI regulations for single-brand retail, the 30% procurement requirement could have been waived if the products involved “cutting-edge” technology, but this request was denied.
India ultimately amended the rules for single-brand license holders in August 2019 to include exports and contract manufacturing in the mandatory 30% local procurement requirement over a five-year period.
After the Indian government permitted foreign single-brand companies to sell directly via webstores regardless of a brick-and-mortar presence, Apple announced its intention to begin selling iPhones directly to Indian consumers via its own online store.
Plans for Apple’s physical stores were also solidified, with a timeframe of 12 to 18 months anticipated. The Cupertino-based tech behemoth will reportedly establish its first store in India in BKC, Mumbai, in October 2019.
This store and the Delhi location in Saket are scheduled to open on April 18 and 20, 2023, respectively.
ET reported on Monday that mall executives expect approximately 2,000 customers to camp out overnight in anticipation of the opening of the Apple store at BKC, and approximately 5,000 customers to visit the store on its opening day.
The average weekday foot traffic at the prestige mall is estimated to be between 3,000 and 4,000, so the inauguration of the Apple store will nearly double the mall’s foot traffic.
India, a credible alternative?
Apple made a proposal to Indian authorities, requesting modifications to FDI regulations, while asserting that it had created jobs in India. The Centre heeded the request and made the modifications, paving the way for Apple’s expansion in India.
Apple tripled iPhone production in India to more than $7 billion last fiscal year in an effort to reduce its reliance on China, which is beset by geopolitical, local, and economic concerns.
“India is a tremendously exciting market for us and a major focus,” Cook said in a February earnings call. We place significant emphasis on the market.
As of March 2023, almost 7% of Apple’s iPhones are manufactured in India, up from 1% in 2021.
Bloomberg reported that Apple may manufacture the next iPhones in India and China simultaneously. If so, it will be the first time iPhone assembly commences simultaneously in two countries. By 2025, Apple could assemble a quarter of its iPhones in India.
Make in India: A distant fantasy or imminent reality?
Through its centerpiece PLI program, the government has been able to attract companies such as Apple and Samsung, signaling to the other titans that India may in the long term be a credible and robust alternative to China.
Since the introduction of Make in India in 2014, the deadline for one of the Modi administration’s primary objectives, to increase the manufacturing share of GDP to 25%, has been moved back three times, from 2020 to 2022 to 2025.
Despite the success tales, numerous companies, including General Motors Co., Ford Motor Co., and Harley-Davidson Inc., have left India due to persistent obstacles, such as coping with the country’s bureaucracy.
Incidents such as past decisions on retrospective taxes that resulted in years of legal disputes between the Indian government and companies such as Vodafone tarnished India’s reputation as an investment destination.
Tesla Inc., a company founded by Elon Musk, is approaching an agreement for a plant in Indonesia. The company had previously stated that it would consider establishing a factory in India if the country first permitted the company to sell imported automobiles by lowering duties.
In addition, renowned global corporations have been reluctant to relocate their headquarters to India, citing supply chain, infrastructure, and labor issues.
In February, FT reported that one of Apple’s suppliers had only achieved a 50% yield on their production line. Apple prefers perfect quality. Its expansion in India has been sluggish due to issues with logistics, tariffs, and infrastructure, according to FT.
The path to becoming the global factory is fraught with obstacles. However, if the government is committed to creating a business-friendly environment in India until at least 2024, the outlook may be brighter than skeptics anticipate.