Apple's plans to manufacture in India are critical as brands like Oppo and Vivo continue to dominate

While a recent report from The Economic Times points to a noticeable drop in prices for both the iPhone 5s and the iPhone SE models, there could be a well-planned reason for this. While the price drop has yet to take place, the idea behind it, as pointed out by the report, hints that Apple indeed wants a bigger slice of India's smartphone market, one that is currently being dominated by Chinese brands like Oppo, Vivo and Korea's Samsung.

The rumour

Today, there's news coming straight from Apple in a statement sent to The Indo Asian News service that the Cuperatino giant has some concrete plans to set up manufacturing of iPhones in India.

In particular Apple told the news network that it plans to manufacture the iPhone SE model in India.

While the report pointed out that the same would be manufactured by Wistron, Apple's Taiwanese manufacturing partner, a Wistron spokesperson told tech2 that it "did not comment on rumors about its business."

Wistron told Reuters that it plans to start manufacturing smartphones in India by mid-2017, but did not specify for whom.

The above image shows iPhone SE

The iPhone SE

Oddly, an unnamed source told Reuters that there is currently no agreement or memorandum of understanding that has been finalised with the Karnataka government.

Going by the IANS report, the first iPhone models to be manufactured in India would be Apple's iPhone SE, a device that is currently being offered as the "affordable iPhone" despite its mid-range Rs 25,000 price tag.

With the iPhone SE production taking place locally, we can expect that price to drop down to the lower twenties (Rs 20,000) so indeed, the manufacturing at Bengaluru, despite being a trial run, will benefit Apple's India operations in some way.

The broader picture

There is, however, a broader picture to this scenario. It is one that allows Apple some major benefits, ones that it has been craving for more than a year now.

Apple has been hard at work for the past year trying get its way with tax and sourcing concessions. These would definitely help Apple bring down the price of its products in India, which in turn would also give it greater market share, which has seen a sea change of sorts this year.

BBK Electronics owned Oppo and Vivo have been fiercely competitive with marketing and offline sales, leaving long-standing international brands like Samsung in the dust.

Recent reports point to Oppo and Vivo increasing their market share from a mere 2 percent to a whopping 18 percent, which is a problem for Apple as well.

Oddly this has Apple's name all over it as the Cupertino giant has recently been struggling with sales in China.

In what continues to be a downward trend, Apple slipped to fifth spot in China, according to market research firm International Data Corporation (IDC).

According to the IDC’s Quarterly Mobile Phone Tracker report, Apple dropped from 58.4 million iPhones in 2015 to 44.9 million iPhones in 2016 while Xiaomi from 64 million Mi phones to 41.5 million, drops of 23 per cent and 36 per cent, respectively.

In contrast, Oppo shipped 78.4 million phones — more than double the 35.4 million it shipped in 2015. Huawei came in at second, shipping 76 million phones, while Vivo managed to almost double its shipments, going from 35 million in 2015 to 69 million last year.

Oppo is spending its monies like no other.

Oppo is spending its monies like no other.

According to IDC analyst Navkendar Singh, Oppo is using its money wisely, "The duty differential offered when mobile phones are manufactured in India versus imported offer savings which can and have been used by these China-based vendors, including Oppo, to invest in marketing, channel development and distribution."

"This is a fairly straight forward and obvious reason to set up and expand the manufacturing base in India" he added.

Singh also said that India is an attractive place to manufacture, thanks to a lower labour cost ,even in comparison to China.

What Apple loses out in China, it probably looks to regain from India, the next big market for smartphones. But with the Chinese invasion from brands like Oppo and Vivo spending big on advertising and manufacturing, is Apple a bit too late?

Not exactly, says Singh "Given that China market is not expected to grow as rapidly as India in next few years, India presents itself as the next big fast growing market. Moreover, India offers a huge potential smartphone replacement users, along with Feature to Smartphone migrants in next few years."

Even right now, Singh claims that Apple’s manufacturing is critical if viewed from the aspect that this will give savings to Apple. "Apple can decide to pass it on to the consumer (unlikely as of now) but also increase its spends on expanding distribution, channel margins, retail marketing spends and ensure placement in smaller towns and cities, where the consumer is highly aspirational and strives for a premium brand like Apple."

Published Date: May 18, 2017 04:18 pm | Updated Date: May 18, 2017 04:18 pm