Apple CEO Tim Cook went to India last week to push his bestselling iPhones. The trip may not have paid off. The Foreign Investment Promotion Board has ruled Apple must comply with local sourcing rules to sell products through its own retail stores, according to people with direct knowledge of matter. The company makes most of its products in China and doesn’t currently meet that criterion.
While India can provide waivers for cutting-edge technology companies, the panel decided it can’t certify Apple for that exception, the people said, asking not to be identified as the decision isn’t public. The FIPB decision needs to be ratified by the government and it could still be overruled.
Tim Cook is trying to capitalise on growth prospects for India, where a billion new smartphones are projected to be sold in the next five years as consumers increase their incomes and adopt new technologies.
Apple trails Samsung Electronics and the home-grown Micromax Informatics in the Indian market now, in part because its products are relatively expensive.The FIPB decision needs to be ratified by finance minister Arun Jaitley, the people said. Finance ministry spokesman DS Malik could not immediately be reached for comment. Apple’s India spokesman said he had no comment to offer.
Apple has used its stylish stores from New York’s Fifth Avenue to Tokyo’s Ginza to elevate sales of its devices around the world. In price-conscious India, most phones are bought at small, congested street-corner shops and carriers typically don’t subsidise handsets through calling plans.
Application hinges on procuring 30% components locally
Apple makes most products in China, doesn’t meet criterion
Waiver possible for cutting-edge technology companies
Panel decided it can’t certify Apple for that exception
“The stores are a very important piece in Apple’s brand-building strategy in India,” said Ankur Bisen, senior vice-president of retail and consumer products at retail consultancy, Technopak Advisors. “They will help bring the brand alive to customers.”
Cook has likened India to China a decade ago, as Apple faces slowing growth in established markets. While coming off a low base, with about 2% of shipments, iPhone sales surged 56% in the March quarter as consumers from India’s burgeoning middle-class aspire to Apple devices.
Apple sells its products at a premium in India. More than 80% of phones sold in the country cost less than $150 while the cheapest new iPhone from Apple is the 4-inch iPhone SE at Rs 39,000. The company’s push to bring in and sell lower-priced refurbished iPhones was rejected after competitors objected, a telecommunications ministry official said earlier this month.
India, with 1.3 billion people, is a potentially-massive market for Apple and peers including Google, Amazon.com and Facebook. Many of those prospects ride on mobile users, with smartphone shipments surging 29% to more than 100 million units last year.
By 2018, India will account for 11% of global smartphone shipments and grow at five times the pace of China, Morgan Stanley said in an April 20 report.