[contingencies]

Trying to interpret this.

First of all $300M isn't a lot of money for this sort of operation. I guess it barely buys a good line of equipment, installed with an operable workforce, if that. Secondly, the amount of manual labour in iPhone assembly has to be pretty minimal with respect to margins. Can anyone enlighten us to the management situation?

I guess perhaps the true story behind the 'asserted' transition to an additional base in India includes other factors like: freeing Foxconn capital from China (currently their largest production base, with rising costs, a slowing market and perennial foreign exchange hassles), gaining additional internal production operations experience within a foreign non-'Chinese' (ie. Taiwan/China) environment, and cross-jurisdictional legal/tax/tariff/exchange rate hedging. (The US-China trade war has to have scared the pants off anyone in a consumer electronics this heavily.)

[NTDF9]

It's a logistics/risk balancing/new demand move.

1. Logistics: Cheaper to ship to rich Middle east and maybe even Europe

2. Risk balancing: With uncertainty at political levels about tariffs and trade rules, it makes sense to distribute production to multiple places in the world.

3. New demand: Lower cost of production == lower prices in India. Apple has negligible penetration in the largest fastest growing market. This move is a bet to try to beat android competition in price and raise global demand for IPhones.

Honestly, this move is a no-brainer. The benefits are endless.

[Ayesh]

I think Apple is pretty late at this point. Xiaomi and Oppo have figured out the distribution, localization, and a sizeable user base already there, and a decent smart phone now costs $150-200. They are quite good phones and from what I understand, price is the biggest driver for sales.

[itissid]

But apple is a luxury brand. You can't say that with Xiaomi or Oppo. With luxury brand the price is not a bug but a feature for the people that swear by them.

And Rich people don't even care about the money. the 50-100 million rich people in india are least bothered about the price tag as long as it signifies luxury and status.

[jpatokal]

Xiaomi is a luxury brand in the Chinese market.

And rich by Indian standards doesn't mean they can afford to spend over $1000 on an iPhone: in India, a top 1% household earns only about $1000/month.

[plibither8]

Apple will mostly rely on its loyal customer base (at least in India) who will support and buy only Apple products, which of course primarily means the iPhone. Plus, if the prices do in fact drop once they start manufacturing in India, I'm sure there will be many more XYZ-Chinese-company to Apple conversions.

[xbmcuser]

Gdp per capita for India is around ~$2000. India does not have much of a market for +$500 phones nor does it have a contract system where the +$500 can be paid over time. So I don't see it help Apple much in gaining market share. At the current Apple prices I have seen multiple long time Apple users leave Apple. Unless Apple is willing to cut its margins dramatically I don't see them getting much of a foot hold in India.

[tiuPapa]

You are forgetting India is a land of 1.3 billion people. There are at least 50 - 100 million people who are willing to spend more than 500$ on a phone. That's a big enough market for Apple to consider.

[vijaybritto]

No. The sale of 500$+ phones in only in a few million.

[tiuPapa]

Yep, but it's growing. The premium segment(above 500$) is the fastest growing segment of the market. And even the segment just below it (300$ - 500$) is a chunky portion of the market who are all potential customers for the premium segment.

[robocat]

1.3 billion people, 2% own an iPhone (according to another comment here), equals 25 million iDevices in India...

[sumedh]

> The sale of 500$+ phones in only in a few million.

Its not about market size today, you have to look into the future as well.

[vijaybritto]

In the future apple's phones would be 1500 plus. They are already making loss. Apple's positioning in India is as a 'premium' brand. It's price is so high that even IT employees buy in EMI. Meanwhile Chinese android phones haves 95% of the quality at 1/5th the price. There is no market fit

[oasisbob]

The problem I see with that argument is that it dismisses what all sorts of other upmarket brands are doing in India.

Volkswagen, Mercedes-Benz and others are making essentially the same play. They must see a valuable enough market to warrant that kind of investment.

[ucaetano]

"The company needs to meet a 30 percent local sourcing rule to be able to open its own stores in the country."

It is just the result of protectionism.

[CPLX]

It’s not “just” that, it’s actially the desired result of the protectionist policy, which appears to have been effective.

[bottled_poe]

How dare a country enforce policies that benefit the domestic economy.

[briandear]

Assuming a benefit is a fallacy. It’s a benefit only which analyzed through a superficial lens.

[bottled_poe]

That’s a very abstract comment. Such policies seem completely measurable to me. Can you elaborate?

[acchow]

Why don't other large, developing countries adopt similar policies? What are the downsides?

[iguy]

Many do. The downside is that a heavy import tax makes whatever is being imported more expensive for local consumers to buy. In some sense this makes them poorer.

The goal is usually to encourage local firms to grow and compete, and sometimes that happens (e.g. Hyundai). But sometimes the local firms become complacent in their walled garden (e.g. Hindustan Motors).

[whenchamenia]

You get ignored by lots of international companies that dont want to play by your silly and often unprofitable rules. Leading to a loss of choice and quality in goods and services, and a general depression of the economy over time. The softer hand moves more grain or something.

[caymanjim]

Revenge in the form of trade wars that screw everyone in the end. Exactly what the US is doing right now with all its tariffs, which are not helping US manufacturers (their stated intent) and are hurting US consumers (due to revenge tariffs).

[gnopgnip]

Many others do, but usually on a more limited basis to protect certain industries. Brazil does for virtually all electronics.

[rodgerd]

Strong government management of the economy was the foundation for the success of Japan, South Korea, and Singapore in the mid 20th century (as an example). So absolutely people do it.