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According to Bloomberg's August 28 report, India relaxed its foreign investment policy. Previously, single-brand companies such as Apple had to locate at least 30% of their local production to open a retail store or online.
On the recently amended policy, India's Minister of Commerce and Industry Piyush Goyal said, "IIt was decided that all purchases made in India by the retail entity of a single brand for this unique brand will be accounted for in the search for local suppliers, whether the goods purchased are sold in India or exported. In addition, it is proposed to remove the current ceiling of taking exports into account for only five years in order to boost exports.. "
The new policy allows Apple (AAPL) to set up an online presence. This represents an improvement over digital platforms such as Amazon (AMZN) and Flipkart for online sales.
Bulky components of Apple products made in China
Apple's supply chain has focused on China, which has prevented it from achieving the 30% purchase target in India. Apple CEO Tim Cook met with Prime Minister Narendra Modi several years ago to discuss purchasing policy in India.
In 2017, Apple began manufacturing the iPhone SE in Bengaluru, India, perhaps to increase Apple's investment in the country and allow it to appeal to the political lobby. Apple opened a development center in Hyderabad that year, creating more than 4,000 jobs in India.
With this change in foreign policy, Apple can launch the online sale of its products in India in the coming months.
Can AAPL gain ground on the smartphone market in India?
The iPhone is struggling to gain market share in India. Livemint's August 29 report indicated that iPhone shipments to India were only 1.2%. India is the fastest growing smartphone market in recent years. However, average consumers see Apple products as niche luxury products.
The average Indian customer using a smartphone usually buys a device for $ 150, while the price of an iPhone is less than $ 700. In addition, Apple products are subject to a luxury tax of more than 20%. Although the price of iPhone XS is $ 999 in the United States, it costs about $ 1,400 in India.
In early 2019, Apple reduced the price of its iPhone XR from $ 1,080 to $ 840 in India. As a result, iPhone sales in India increased by a double-digit percentage in June. Like other emerging economies, the average customer of India is price sensitive.
Chinese brands such as Xiaomi, Oppo and Vivo are major players in smartphones in India. India's purchasing power for the middle class continues to grow. However, it might take a while for Apple to gain significant influence in the country.
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