India to be world’s 3rd assembler of iPhones

index.jpgSource: Times of India, Jan 04, 2017

Bengaluru: With the upcoming Bengaluru assembly plant of Apple, India will become only the third country to do the final assembly of iPhones -an indication of how important the country has become for the world’s most-valued company.Apart from one assembly facility in Brazil, all of Apple’s assembly units for its bestselling product are in China.

Apple uses a global and fairly complex supply chain.The parts for the iPhone, iPad, iPod and Mac are manufactured, mostly by third parties, across 28 countries. It has 766 suppliers, of which 346 are based in China, 126 in Japan, and 69 in the US. There is one in India -in Sriperumbudur in Tamil Nadu. That’s a unit of Flextronics. But it’s not clear what the unit makes.

Some parts made by these suppliers are sub-assembled in certain locations. All the sub-assembled units and other parts are brought together for final assembly in either China or Brazil in the case of iPhones. For the Apple Mac, the final assembly happens in China, US, and Ireland -the last of these is Apple’s own facility -and for the iPod, China is the only final assembly location.

With India becoming one of the world’s biggest smart of the world’s biggest smartphone markets and one of iPhone’s fastest growing markets, Apple has decided to assemble the iPhone here.As TOI reported last week, Taiwan’s Wistron, one of Apple’s suppliers and assemblers, will set up a facility in Bengaluru’s industrial hub of Peenya for the purpose.The products from this facility are expected to be available in the domestic market towards the end of next year.

Wistron has three supply facilities for Apple and an iPhone final assembly unit in China.

“An assembly unit does not require big investments,” said Jaipal Singh, market analyst at research firm IDC. He said this has been a strategy that all Chinese handset manufacturers have followed in India over the past couple of years. “Labour in India is cheaper than in China.

It makes sense to grow the Indian market by establishing a domestic plant,” he said. Analysts said the unit would also manufacture for exports over time.

Data from Hong Kongbased Counterpoint Technology Market Research showed Apple sold 2.5 million iPhones in India from October 2015 to September 2016, a rise of more than 50% over the year-ago period. Apple India clocked robust sales touching Rs 9,997 crore in the 2016 financial year, up 56% from Rs 6,472 crore in the year before. iPhones are expensive, but with a local assembly unit, some analysts believe, Apple can avoid import tariffs and cut the iPhone price by around 15%, allowing it to expand the market.

Apple CEO Tim Cook recently said India’s low percapita income would not become an impediment in growing Apple’s market share in the country . More than 50% of Apple’s sales in India are contributed by older models which become cheaper once newer models are launched, indicating the brand’s aspirational value.Apple has around 40-45% market share in India’s premium phone segment.

 

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