Apple iPhones To Be Manufactured in Bengaluru: Expect A Price Cut?

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The dust on Apple’s plan to manufacture iPhones in India has started settling now. The Karnataka government has released an official note confirming Bengaluru as the hub of iPhone manufacturing in India, initially. The state government has welcomed Apple’s move to select Bengaluru and has assured to provide all required infrastructure support to ease out the manufacturing process of iPhones in India. The production is expected to begin from June this year, albeit there is no timeline has been fixed officially.

Priyank Karge, the IT minister of Karnataka, said Apple’s intentions to manufacture iPhones in Bengaluru would establish India as one of the major manufacturing hubs at the global level. India is only the third country where iPhones would be assembled.

The manufacturing unit would be set up in Peenya, the industrial hub of the city. The production of iPhone would be taken care by Wistron, a Taiwanese company which is the original equipment manufacturer (OEM) of iPhone.

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Rumours of Apple setting up a manufacturing unit of iPhone in Bengaluru started making rounds on the Internet in December 2016. Apple posted few job openings on its portal, including an Operations Program Manager for iPhone at its OEM in Bengaluru. The responsibility of the manager includes leading the operations team, manage the component readiness, ensuring parts availability, quality and collaborating with cross-functional supply chain teams.

“We made concerted efforts to reach out to Apple directly. We want to create a conducive environment for global majors like Apple so that we emerge as their preferred partner in their India growth story,” Kharge told TOI.

So, will this lead to a price cut in iPhone in India?

Bengaluru has roped in Apple by beating Gujarat, Maharastra and Telangana who were actively pursuing the Cupertino giant to set up the upcoming manufacturing units in the state. However, the unparalleled large pool of technology skills and tech ecosystem worked in favor of Bengaluru.

It’s quite unlikely that Apple will make a significant price cut in iPhone after the production of iPhones started in Bengaluru. However, it’s still not clear if Apple would be enjoying any tax benefits against its efforts to strengthen the Make in India campaign started by the Indian Prime Minister, Mr Narendra Modi.

Many industry analysts believe that Apple’s move to set up a manufacturing unit in India will have a positive impact on the company. Apple’s is desperately trying to deep penetrate India with iPhone, but price barrier is what making users shy away from iPhone. By lowering the price of iPhone by 10% – 15% in India, Apple could easily lure more smartphone buyers in India who explore devices price tagged $500 or more. With just 25% smartphone penetration (population), India is the most lucrative market for all smartphone manufacturers.

The entry of Chinese players like Huawei, Lenovo, Oppo, Vivo and Xiaomi, in India has accelerated the adoption rate of smartphone phone in India. These manufacturers have flooded the entry and mid-level smartphone market with very price competitive devices. Consequently, the growth of feature phones is almost dead and people are familiar with the advantages of owning a smartphone like never before. Both, Samsung and Apple, are to capitalise on the trend by positioning their mid-range and premium range devices to ready-to-upgrade smartphone users. Apple’s strategy to keep iPhone 5s sales active in India at the jaw-dropping price of $300 is a clear indication what Apple is up to.

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While Apple is not willing to leave any stone unturned, it would be interesting to see what price strategy Cupertino-giant opt to grab a sizable share of the India smartphone market – especially after the productions of iPhone kicks off in the price sensitive country.

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