Apple's plan to manufacture the iPhone 14 in India could be a huge boost to India's ambitions to become a global manufacturing hub, but analysts say it is unlikely to lower the prices of these devices anytime soon.
Apple announced on September 26 that it is "excited" to be manufacturing the iPhone 14 in India, just weeks after the device was unveiled on September 7. Foxconn, the company's primary global manufacturing partner, will ship the device from its Sriperumbudur facility on the outskirts of Chennai.
While Apple has been manufacturing iPhones in India since 2017, until now it was making older generation handsets through partners such as Foxconn, Wistron, and Pegatron with a lag of around six to nine months from its Chinese facilities. The company currently makes iPhone SE, iPhone 12, and iPhone 13 in the country.
This development comes as Apple seeks to diversify its manufacturing capabilities beyond China amid rising geopolitical tensions between the two countries. The Cupertino tech giant's supply chain was also disrupted for months as a result of China's strict Covid-19 measures.
According to a recent JPMorgan report, Apple may move 5% of its global iPhone 14 production to India by late 2022 and later expand its capacity to make one out of every four iPhones in India by 2025.
At the same time, India aspires to become a global hub for electronics manufacturing, with an ambitious plan to produce $300 billion in electronics products by 2025-26, with $120 billion exported and $70-80 billion consumed by domestic firms.
In an earlier interview with Moneycontrol, Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar stated that India has a great opportunity to become a "trusted supply chain" at a time when the world is looking for diversification of the $1.5 trillion electronics value chain dominated by China.
Last year, the government approved a Rs 76,000-crore scheme with incentives for companies involved in silicon semiconductor fabs, display fabs, compound semiconductors, silicon photonics, sensor fabs, semiconductor packaging, and semiconductor design.
According to Navkendar Singh, associate vice president for device research at IDC India, South Asia, and ANZ, this development should be viewed as a confidence-boosting measure for India's capabilities. However, Apple is unlikely to lower the prices of these devices in the near future.
"I don't think we should expect Apple to drop the price for iPhone 14, since the demand is not so high for the device and there is enough stock in the market. Also, it is the latest device and Apple is very resistant to dropping the price very frequently. Our estimate is Apple will either absorb the savings or invest in marketing" he said.
Faisal Kawoosa, founder of research firm TechArc, echoed these sentiments, saying the move could boost India's reputation as a manufacturing destination and encourage other global OEMs to manufacture their flagship products in India.
"I don't see any immediate impact (on pricing), but in the long term there should be some benefit accruing out of the incentives being offered by the government, which Apple has availed," he said.
Tarun Pathak, research director at Counterpoint Research, noted that while this is "just a start," it will provide Apple with a lot of flexibility and save 20% on import duty by manufacturing the iPhone 14 in India.
"If extended to other product categories, Apple will have a real price advantage here. Maybe we will see future launches at a lower price than their previous ones" he said.
Pathak said this will also benefit Apple EMS (electronics manufacturing service) suppliers availing PLI benefits from the government as they will likely help achieve the targets.
Apple currently leads the premium smartphone market—above Rs 30,000—in India. The company shipped 1 million iPhones in the country in Q2 2022, registering a 63% year-on-year growth, according to the market research firm Counterpoint Research.
Apple shipped over six million iPhone units to India in 2021, more than double the three million shipped in 2020, due to aggressive growth of its offline presence and improved manufacturing capabilities in the nation, according to Counterpoint. This is despite India becoming one of the most expensive locations where the iPhone is sold across the world.
Apple CEO Tim Cook stated in July that the tech giant nearly doubled its revenue in the country for the quarter ended June 2022, without providing any specifics.
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