In an effort to diversify its production out of China, US tech giant, Apple Inc. may be considering moving one-fifth of its Chinese manufacturing capacity into India through Taiwanese contract manufacturers, Wistron and Foxconn.
If this decision is finalised, Apple phones will be able to take advantage of benefits under the Indian government’s production-linked incentive (PLI) scheme, which was recently announced to incentivise local manufacturing and exports of consumer electronics. This scheme also states that a company must manufacture at least $10 billion worth of mobile phones between 2020 and 2025 to benefit from it and are required to meet a specified target on a yearly basis. The scheme also has a corpus of ₹40,000 Crore and provides an incentive of 4-6% on incremental sales (over the base year) of goods manufactured in India. It also covers under target segments to eligible companies, for a period of five years subsequent to the base year as defined.
So, over the last few months, Apple’s senior executives and high ranking central government officials have been holding talks to not only shift some production to India, but to also increase its Indian manufacturing revenues to near ₹3 Lakh Crore, over the next 5 years.
Currently, Apple sells $1.5 billion worth of phones in India, less than 33% of which are locally manufactured. In contrast, in 2018-2019 Apple produced $220 billion worth of products in China. Now, even if this move could make Apple the largest exporter of India, there are some kinks in the plan which need to be smoothed over. Most of them have to do with adjusting its plans to the scheme’s specifics, sources are saying.
“There are some problems with some of the PLI clauses. For instance, valuing the entire plant and machinery already in use in its plants across China and other places at 40% of that value and the extent of the business information sought under the scheme are some of the irritants,” a source told the press. But Apple has declined to comment on this development.
But, the Modi Government is very eager to help set up India as the manufacturing hub of any high-level foreign tech company. To that end, Prime Minister Narendra Modi had also met with executives from Indian phone maker Lava alongside industry titans like Apple and Samsung, on December 28 2019, to sell this scheme. So, now, government officials seem to be more than willing to work with Apple about any concerns they may have with the details in PLI scheme, say insider sources.
As a result of the centres on-going mission of ‘make in India’ cellular phone exports had amounted to ₹2.2 Lakh Crore, last fiscal. However, some industry analysts are opining that India might not be up to the mark, in terms of rapid manufacturing and scaling up high-tech product exports.
We don’t have (an) ecosystem ready, which could support any large-scale deployment. The ecosystem right from skilling to ancillaries is almost negligible. This weakens confidence of anyone wanting to plan big and long term,” said Faisal Kawoosa, founder at research agency TechArc.
In the wake of the global pandemic which originated out of China, other major economies, including Japan, have already announced plans to move some manufacturing bases out of the country. But, with this decision, Apple also wants to bow, in principle, out of the US-China trade war that has been ongoing for more than a year now. The war had led to significant tariffs on all Chinese-manufactured products imported into USA.