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Apple to Begin Assembling iPhone SE in India from April
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Reportedly, Apple Inc. (AAPL - Free Report) in collaboration with its manufacturer, Wistron Inc. will begin to assemble iPhone SE in India starting this April. The plant will be located in the state of Karnataka in south India.
Though there is no official word on the matter from Apple or Wistron, it has been reported that initially the Cupertino giant wants to assemble 0.3-0.4 million units of iPhone SE. Apple hasn’t even waited for the numerous tax concessions that it sought from the India government including the 15-year customs duty holiday.
Analysts observe that it was prudent on part of Apple to begin assembling its most economic iPhone offering, SE, which was launched to cater to cost sensitive markets like India. Plus, it also will support future iOS upgrades unlike iPhone 5S, which will soon be discontinued in most of the markets including India.
Since the last year, Apple has been increasing its focus on India to claim a greater share of the vast smartphone market, of which it reportedly holds only 2% as of now. Apple faces slowing iPhone demand in most of the regions, either because of competition or regulatory hurdles (China) or market saturation (the U.S). Therefore, it makes sense for the company to solidify its position in India, which is projected to become the second largest smartphone market in the world. In fiscal 2016, Apple sales in India grew approximately 50% over the prior fiscal.
Furthermore, a younger (and skilled) population and increasing investment in broadband network by the government also make India an attractive growth opportunity for Apple over the long run. In fact, the government under PM Narendra Modi is eager to bring foreign capital and boost manufacturing facilities in India.
The recently outlined FDI policy also bodes well for the company as it eliminates the requirement to locally source products for at least a three-year period. This will enable Apple to open its solely-owned retails stores in India. Thereafter, the company will have to comply with the rule. The company has also partnered with telecom company Reliance, which is providing its Jio (a unique all-IP network) service for free with the new iPhones.
Last year, Tim Cook was on a charm offensive in India. Besides meeting Modi, he also announced the opening of an iOS App Design and Development Accelerator in Bengaluru and a map development office in another southern Indian city, Hyderabad in collaboration with regional firm RMSI.
Challenges
The market is highly cost sensitive. Reportedly, majority of the smartphones sold are priced around INR 10K (roughly $145). iPhone 7 on the other hand costs almost five times more. Even iPhone SE is priced at INR 30K. The lion's share of Apple’s revenues in the country comes from devices, which are a couple of generations old. Newer models have relatively low demand given the hefty price tag. A few days back, it was reported that the Apple team in India is trying to increase revenues to $3 billion by 2017-18 and by local assembling operations, the company can start to operate its own retail outlets and avail a 10% tax benefit. This should lower prices.
Plus, Apple’s rival Samsung along with a few Chinese smartphone makers dominates this market. Samsung has long been in the market and with reportedly 23% share, it is a leading player in the country. Apple is quite late to the party.
Also, Apple’s lack of focus on regional customers’ demand is a concern. India is categorized by handsets that work on dual SIMs. Apparently, Apple is not keen on making dual SIM handsets. This could be a very big impediment to growth in the country.
Also, analysts observe that Apple is “relocating” manufacturing to India from China, given rising labor costs. However another analyst argues that though labor is cheap compared with China, productivity is relatively better in China. Simple assembling may not drastically bring down prices. However, the creation of a local supply chain as in China will be a big positive.
Despite the pros and cons, Apple is expected to continue its India drive. It will be taking up a lot more initiatives this year. However, whether those initiatives yield desirable results remains a watch and see story.
Apple, of course, is not the only tech player eyeing India for growth. Given the potential of this market, Silicon Valley’s interest is well understood. From Microsoft Corp. (MSFT - Free Report) to Alphabet (GOOGL - Free Report) to Facebook Inc. all remain laser focused on the market.
Over the past one year, shares of Apple have registered growth of 37.81% compared with the Zacks Computer Mini industry’s gain of 37.59%.
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Apple to Begin Assembling iPhone SE in India from April
Reportedly, Apple Inc. (AAPL - Free Report) in collaboration with its manufacturer, Wistron Inc. will begin to assemble iPhone SE in India starting this April. The plant will be located in the state of Karnataka in south India.
Though there is no official word on the matter from Apple or Wistron, it has been reported that initially the Cupertino giant wants to assemble 0.3-0.4 million units of iPhone SE. Apple hasn’t even waited for the numerous tax concessions that it sought from the India government including the 15-year customs duty holiday.
Analysts observe that it was prudent on part of Apple to begin assembling its most economic iPhone offering, SE, which was launched to cater to cost sensitive markets like India. Plus, it also will support future iOS upgrades unlike iPhone 5S, which will soon be discontinued in most of the markets including India.
Apple Inc. Price
Apple Inc. Price | Apple Inc. Quote
Why is Apple Keen on India?
Since the last year, Apple has been increasing its focus on India to claim a greater share of the vast smartphone market, of which it reportedly holds only 2% as of now. Apple faces slowing iPhone demand in most of the regions, either because of competition or regulatory hurdles (China) or market saturation (the U.S). Therefore, it makes sense for the company to solidify its position in India, which is projected to become the second largest smartphone market in the world. In fiscal 2016, Apple sales in India grew approximately 50% over the prior fiscal.
Furthermore, a younger (and skilled) population and increasing investment in broadband network by the government also make India an attractive growth opportunity for Apple over the long run. In fact, the government under PM Narendra Modi is eager to bring foreign capital and boost manufacturing facilities in India.
The recently outlined FDI policy also bodes well for the company as it eliminates the requirement to locally source products for at least a three-year period. This will enable Apple to open its solely-owned retails stores in India. Thereafter, the company will have to comply with the rule. The company has also partnered with telecom company Reliance, which is providing its Jio (a unique all-IP network) service for free with the new iPhones.
Last year, Tim Cook was on a charm offensive in India. Besides meeting Modi, he also announced the opening of an iOS App Design and Development Accelerator in Bengaluru and a map development office in another southern Indian city, Hyderabad in collaboration with regional firm RMSI.
Challenges
The market is highly cost sensitive. Reportedly, majority of the smartphones sold are priced around INR 10K (roughly $145). iPhone 7 on the other hand costs almost five times more. Even iPhone SE is priced at INR 30K. The lion's share of Apple’s revenues in the country comes from devices, which are a couple of generations old. Newer models have relatively low demand given the hefty price tag. A few days back, it was reported that the Apple team in India is trying to increase revenues to $3 billion by 2017-18 and by local assembling operations, the company can start to operate its own retail outlets and avail a 10% tax benefit. This should lower prices.
Plus, Apple’s rival Samsung along with a few Chinese smartphone makers dominates this market. Samsung has long been in the market and with reportedly 23% share, it is a leading player in the country. Apple is quite late to the party.
Also, Apple’s lack of focus on regional customers’ demand is a concern. India is categorized by handsets that work on dual SIMs. Apparently, Apple is not keen on making dual SIM handsets. This could be a very big impediment to growth in the country.
Also, analysts observe that Apple is “relocating” manufacturing to India from China, given rising labor costs. However another analyst argues that though labor is cheap compared with China, productivity is relatively better in China. Simple assembling may not drastically bring down prices. However, the creation of a local supply chain as in China will be a big positive.
Despite the pros and cons, Apple is expected to continue its India drive. It will be taking up a lot more initiatives this year. However, whether those initiatives yield desirable results remains a watch and see story.
Apple, of course, is not the only tech player eyeing India for growth. Given the potential of this market, Silicon Valley’s interest is well understood. From Microsoft Corp. (MSFT - Free Report) to Alphabet (GOOGL - Free Report) to Facebook Inc. all remain laser focused on the market.
Zacks Rank & Price Movement
At present, Apple has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past one year, shares of Apple have registered growth of 37.81% compared with the Zacks Computer Mini industry’s gain of 37.59%.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>