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Apple manufacturer to build budget iPhone facility in India (AAPL)
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Apple’s Taiwanese contract manufacturer Wistron Corp. is reportedly planning a new iPhone production facility in Bengaluru, India, according to Reuters.
Wistron is in the process of finalizing a land deal in the region and plans to invest about $157 million to develop the facility.
The production site will likely assemble inexpensive iPhone 6s models for consumers in India. Already, Wistron has been producing the iPhone SE in India since last year.
The move comes following the government’s decision last month to raise import taxes on electronics, such as mobile phones. To promote domestic manufacturing in India, the government set out to raise the customs duty on phones to 15%, up from 10%. As a result, Apple increased the price of every model, except the locally produced iPhone SE, an average of 3.5%. Shifting production to India would help Apple cut costs of the iPhone 6s and drive uptake of its iPhone devices.
There’s a significant opportunity for Apple in the booming region. Here’s why the company’s pushing for a production facility in India:
Apple already lags behind rivals in India’s smartphone market. In Q4 2017, Apple accounted for less than 3% of the Indian smartphone market, while Samsung and Xiaomi captured 23% and 25% of the market, respectively.
India’s on track to become the fastest-growing smartphone market following declining smartphone shipments in China. China’s smartphone market saw its first annual decline, 4%, in shipments in 2017, which included a 14% drop in Q4 2017, according to Canalys. While demand cools in markets like China, not having a major presence in the region will hurt Apple.
To significantly grow its mindshare in India, Apple needs to capture part of the lower end of India’s smartphone market. Apple already dominates the premium device segment in India, accounting for 43% of India’s premium smartphone segment at the end of Q1 2017. To boost mindshare, and more importantly, its services revenues, Apple needs to make inroads in this market segment; shifting production of the iPhone 6s to India converges with this effort.
International markets, and India in particular, are crucial for Apple’s future growth.International sales accounted for 62%, or $32.6 billion, of Apple's total revenue in Q4, while revenue from emerging markets outside of greater China grew 40% from Q4 2016. Most notably, revenue from India more than doubled YoY, as Apple increasingly works toward capturing the country’s booming smartphone-using population. India recently surpassed the US to become the second-largest smartphone market by shipments behind China, and its growth is expected to continue as data and devices become more affordable in the region.
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