The core issue is the government’s demand that Apple must source most of its components from local manufacturers.

India unlikely to cede ground to Apple over local sourcing of components import laws
Atom Tech Shorts Tuesday, December 12, 2017 - 17:56

The tug of war between the Government of India and Apple, on some of the concessions that the US company is seeking continues. The Indian government has made it clear on many occasions that it cannot alter its policies to accommodate one company.

According to a Reuters report, the core issue relates to the stress by the government that Apple must try and source as many of its components from local manufacturers as possible. However, Apple feels this process may take time till the ecosystem here is made conducive for their components to be locally made at competitive prices. The government is not willing to blink.

Till now, Apple is only assembling its iPhone SE model here and wants to expand to cover its other products as well. The government’s dilemma is that while it wants Apple’s investment in the country and the 5,000-10,000 jobs that the company has promised, making any concessions for Apple specifically can stir a hornet’s nest since Apple hardly has a market share of 2% and more importantly, the much-publicized Make in India campaign will go for a toss.

For the government, if it has to encourage local component manufacturers to set up shop and be competitive then it has to keep the duty on the imported components high. If it reduces the duty then the market will be flooded with imported components leaving Indian units high and dry. In any case, reducing the duty for the sake of one particular company, especially for a product like iPhones, is never done in the Indian context. Even at the present levels, it is reported that more than 90% of the mobile phone components are imported out of a total estimated value of $14 billion.

There is therefore a ‘Phased Manufacturing Programme’ that the government makes the foreign investors in most cases agree to. Under this there will be a gradual switching over of buying components from imports to indigenous suppliers. Apple is finding this PMP difficult to implement; hence this stalemate.

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