On Monday, Apple Inc announced it had started assembling iPhone 14, the latest in the series of Apple phones, in India at the Foxconn factory. With this, the company achieved a significant milestone by bridging the gap between the day of the phone’s global launch (September 16) and assembling the devices in India.
The move to assemble iPhone 14 in India soon after the phone’s global launch raises expectations that the Cupertino-based company could reduce the price of its new models as it does not have to pay customs duties on the devices when imported from China.
However, sources aware of the company’s working say that such a move will not be immediate, and customers might have to wait for a quarter or more for it to be reflected in lower prices in the country.
In a statement, the company announced: “We’re excited to be manufacturing iPhone 14 in India. The new iPhone introduces groundbreaking new technologies and important safety capabilities.”
Apple effectively pays 26 per cent duty on the free on board (FOB) value of imported phones. This includes 22 per cent basic customs duty (20 per cent customs duty and a surcharge of 10 per cent over it) and an additional 4 per cent as GST. It pays 4 per cent as GST because it pays 18 per cent on the phone’s value after basic customs duty (BCD).
By making the devices in India, the company can pass on a substantial portion of the savings to the customers through lower prices.
While Apple Inc spokesperson did not respond to a query about when and by how much the prices will fall, sources mentioned earlier say there are some key challenges. For one, the company’s vendors have to scale up production in India so that it has enough “Made in India” iPhone 14s to cater to domestic demand and does not need to import as it cannot offer two different prices.
Two, the company has already discounted the price in anticipation of its manufacturing in the country and has absorbed the unprecedented depreciation of the rupee with the dollar.
However, experts say that the company should be able to reduce its prices by anything between 17-20 per cent, with manufacturing in the country. They point out the difference in pricing in comparable models in the US, where it is amongst the cheapest and in India is pretty steep. For instance, for the top-of-the-line iPhone 14 Pro with 256 GB memory, the price differential between India and the US is over Rs 50,000 (it is Rs 139,900 in India compared to Rs 89,623 in the US).
With iPhone 14 assembly starting in India just a few days after the global launch, Apple is trying to expedite the process of reducing its dependence on China. Over 95 per cent of all iPhones are still made in China. Based on estimates and its commitment under the production-linked incentive (PLI) scheme, the company’s vendors are expected to produce a minimum of 12 per cent of its global production of phones in India by 2025-26.
Apple has been quietly working to reduce the gap between launching its new phones and assembling them in India, which began in 2017 with the iPhone SE.
But 2022 will, in many ways, be a watershed year, with two of Apple’s flagship models being assembled in India in the same year. Before iPhone 14, the company started assembling iPhone 13 in India in April 2022, seven months after its global launch in September 2021. This gap would’ve been much lower had it not been for some labour issues at the Foxconn plant in Karnataka.
However, just five months later, iPhone 14 is being “Assembled in India”.