Apple’s new long-term India strategy is a bid to win local consumers (AAPL)

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Apple’s largest iPhone manufacturer, Foxconn, confirmed that it will begin mass production of high-end iPhones in India this year, according to Foxconn Technology Group Chairman Terry Gou, per Bloomberg.

Reuters

Currently, Foxconn mainly produces iPhones for Apple in China, but the company will initially invest $300 million to set up and scale iPhone production in India.

The move signals a departure from Apple’s India strategy, as the firm previously only made inexpensive iPhone models, like the iPhone 6S and iPhone SE, through iPhone supplier Winstron Corp.

Here’s what it means: Local production of Apple’s high-end smartphones will make the company more competitive in India.

It will cut the cost of iPhones for consumers in the country. India has some of the highest markups on devices in the world due to a 20% import tax, which jumped from 15% in early 2018. For instance, the $999 64GB iPhone XS goes for approximately $1,424 in India. The move should help boost sales of the iPhone models in India that weren’t previously assembled in the country due to their lower costs.
It’ll facilitate Apple’s retail ambitions in India, which is also necessary for improving brand perception in the country. Due to government regulations, Apple can only operate retail stores in the region if it sources at least 30% of its materials locally, which it currently doesn’t do. With its own stores, the company can fight its negative brand perception among Indian customers: It scored a -22 on a scale where anything above zero is considered a positive perception, according to RedQuanta. The company’s poor perception is in part because customers must rely on authorized third-party service centers for repairs, which consumers say don’t deliver Apple’s award-winning customer service.

The bigger picture: Apple’s latest moves are unlikely to have an immediate impact on premium iPhone adoption in India.

Regardless of Apple’s move toward local production, the high price points of the company’s premium iPhones will ultimately inhibit mass uptake of its devices. That’s because about 75% of smartphones sold in India cost less than $250, and 95% cost under $500, according to The Wall Street Journal.

And even though the average selling price of a phone in India is expected to rise 18% year-over-year (YoY) to between Rs 13,000 and Rs 15,000 ($190 and $210) in 2019, that still indicates that there isn’t strong demand for premium phones in the market. This likely signals that Apple is investing in a long-term strategy to win over consumers in India.

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