Sushma Ramachandran

Apple has come to town. The iconic tech brand has begun opening its renowned retail stores in India. The Mumbai outlet had customers waiting in winding queues before the launch just like in other Apple stores around the world. Though the prices of products sold here are premium goods, by Indian standards, there seems to be no dearth of buyers judging by the enthusiasm on the opening day. The company’s CEO Tim Cook made the most of the hoopla surrounding the launch by getting himself clicked with film and cricket celebrities in the financial capital. This was followed by meetings with political leaders including Prime Minister Narendra Modi in the capital.

The excitement over Apple’s retail store launch is justified as the tech giant has finally signaled its interest in this country both as a market for its products and as an export base. This comes after decades of sidestepping the subcontinent while putting its focus completely on China. Its factories have been located there and it has been tapping the huge consumer market in that country as well.

The result of this neglect has been that domestic consumers have opted for the Google-owned Android operating system rather than the iOS model developed by Apple. As much as 95 percent of the market is dominated by Android phones, leaving only a paltry four percent for iOS. With the new aggressive marketing strategy for this country, this situation could likely change in the coming years.

The pivot to India by the tech giant is part of what is known as China plus one policy by global firms seeking to move out of China. The need to do so had been recognized during the Covid pandemic when global supply chains linked to that country were disrupted. Like many other multinationals, Apple recognized that putting all its eggs in one basket, as the cliche goes, was a risky strategy in the long run. It had initially decided to expand production in its Tamil Nadu facility. But the plans became much bigger after the implementation of the zero Covid policy in China shut down manufacturing facilities for many months and led to long delays in the supply of Apple products.

The company’s contract manufacturers, the Taiwanese firms Foxconn, Wistron, and Pegatron are now working on setting up many more production units in this country. Wistron had set up an assembly facility in Bengaluru in 2017 while Foxconn launched production in Tamil Nadu in 2019.  Pegatron began production in the same state in September last year.  The Foxconn facility in Tamil Nadu has already become an export hub. But this facility is now proposed to be made larger while a research and development center is proposed to be set up in Bengaluru.

The result of the creation of more manufacturing plants by Apple as well as a host of other global firms for mobile phones has been a spurt in exports. This is even as other merchandise goods are reaching a plateau in growth due to subdued demand in key markets. Mobile phone exports have nearly doubled from 5.8 billion dollars in 2021-22 to 11.2 billion dollars in 2022-23.  Of this, as much as 5 billion dollars worth of exports are iPhones made by Apple while Samsung accounts for another 4 billion dollars. This makes mobile phones the fastest-growing segment in the country’s export basket.

The rapid pace of mobile phone exports means that the production-linked incentive (PLI) scheme for this sector has succeeded probably beyond expectations. The way the PLI scheme works is to provide incentives for the sale of manufactured goods in selected sectors. It was launched initially for electronics and mobile phones and the focus has been on increasing domestic production of components while trying to generate more jobs. It has now been expanded to cover as many as 13 industries considered to have the potential of becoming world-class manufacturers and exporters.

For the electronics sector, the scheme was launched three years ago with the rationale that the sector suffered from several disabilities, making it less competitive globally. According to the Electronics Ministry, this included a lack of adequate infrastructure, domestic supply chains and logistics, high cost of finance, inadequate availability of power, and limited design capabilities.

One of the major lacunas in the development of the electronics industry, however, is the fact that much of the production is simply assembly of components imported from other countries. It is true that many of the mobile phone production units initially were assembly line units. This situation is now reported to be changing gradually with more components being manufactured within the country. Even rating agency ICRA noted in a study last year that domestic sourcing of components is set to rise from 15 to 20 percent to 35 to 40 percent by 2026.

The entry of Apple at the retail level is thus the culmination of a series of policy initiatives to make it easier for electronics companies to set up shop in this country. It was recognised over the past few years that many multinationals were seeking to ahead with the China plus one policy given the difficulties faced by manufacturers during the pandemic. Thus, efforts were made to make conditions easier for such firms including tech giants like Apple.

Job creation is another aspect of the expansion of the electronics industry. Apple says its entry will lead to one million more jobs in the mobile phones sector, though this may include both direct and indirect employment. With other global tech companies likely to follow in their footsteps, it can only be hoped that many more jobs will be available for skilled and unskilled workers in the industry.

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As for the launch of the iconic retail store which promises an experience rather than merely being just a sales outlet, it was delayed due to stringent regulations earlier about single-brand retail shops.  Till 2018 there was a mandate that 30 percent of the sourcing should be done locally. This clause was then relaxed to allow five years to achieve such sourcing levels.

The net result is not just hyped over the Apple showroom but the prospect that India will become a major supplier of mobile phones to the world in the coming years.