[deepGem]

Man, finally this came along. Apple had been negotiating for almost 3 years to setup manufacturing in India. Foxconn got a start in the outskirts of Bangalore where they manufacture iPhone SEs.

I as a customer am super glad this is coming along. Tired of paying a premium for Apple products in India. In addition to iPhones I seriously hope they start iPad manufacturing as well. IMHO iPads will probably have a better success rate in India once the prices reach parity with US.

[hodder]

What makes you think you will not pay a premium for iPhones in India in the future?

Apple prices based on demand curves, not supply costs.

[finebalance]

India has a really high import tax on electronic items. Even if Apple charges a slight premium over its US prices, it's still going to be significantly cheaper than what it currently is.

For example: a 64 GB iPhone X is currently selling for around 1100 dollars.

[arcticbull]

Or they keep them the same price and make even more impressive margins. There's a reason they have 87% of the world smartphone profit share [1] and it's not because they're giving them away or passing on the cost savings to their customers.

Import duty on iPhones is 18% and 28% on iPads as of 2015. [2] Wealth inequality in India is pretty high (not as high as in the US, though, GINI 35.6 vs 40.4), and it's GDP per capita is just $1,939. Per your data, they're currently charging $1,100 which is a whopping 57% of GDP per capita.

My gut tells me reducing the price of a super-luxury good by 18% won't increase demand enough to make up for pocketing the 18% savings. That would be like pricing an iPhone at $33,000 in America. I can't imagine reducing the price to $27,000 would dramatically increase the number of buyers. Or a Rolex from $100K to $82K.

I guess we'll see!

[1] https://www.forbes.com/sites/chuckjones/2018/03/02/apple-con...

[2] https://www.labnol.org/india/custom-import-duties/19306/

[simonh]

Apple's market share in India is about 2% while in China it's about 7 percent. Apple's profit margin is generally about 30%.

The import tax in India is now 20%. Lets suppose Apple could increase market share in India to match that in China by reducing prices by the 20% tax, and compare that to keeping the 20% as extra profit but not increasing market share.

2% market share on 50% profit margin (existing 30% margin plus tax margin of 20%) sounds pretty good. However 30% profits on 7% market share yields more than double the overall profits.

Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? A simple argument that increased profit margin always beats higher sales implies that the perfect price point is infinity. At some point this strategy must yield diminishing returns.

[glogla]

> Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already?

They kind of do, except they're slowly easing into it. First iPhone was 499 USD for the base model. iPhone X was 999 USD for the base model.

So over 10 years, they slowly raised their prices 100 %.

[iguy]

Or else the cost of producing a relatively small number of phones inside India won't be as cheap as the global HQ operation. If import taxes were the only consideration, you might expect them to open a new small factory when the extra cost of running it was about equal to the taxes.

Quite a few countries have car industries which work roughly like this -- the local VW plant will cost twice as much to run (per car) as the mothership, roughy matching a 100% import tax. (Although in reality there is often more to the story, like producing exactly one model there & exporting those for credit against imports...)

[seanmcdirmid]

India raised it to 20% in 2018. https://money.cnn.com/2018/02/01/technology/india-iphone-tar...

Then there is 12% tax on top of that.

[vbezhenar]

Sales might even reduce, because some people might not consider them luxury enough anymore.

[Alterlife]

> a 64 GB iPhone X is currently selling for around 1100 dollars.

That isn't right. The iPhone X costs (just under) 1,00,000 INR retail in India, which is over 1400 usd.

This includes taxes.

For reference: https://www.flipkart.com/mobiles/apple~brand/pr?sid=tyy,4io&

[dmitriid]

That’s what Apple usually does: they keep roughly the same digits, and change the currency. And it usually makes their products significantly more expensive outside of the US.

I live in Sweden, and the pricing will go like this:

- The US: $999

- The EU: €999

- Sweden: 9900 SEK

Depending on currency rates, it can become up to 30% more expensive.

My favorite discovery was around the time of the trashcan MacPro. It was cheaper to fly to New York, buy the Mac, and fly back than to buy one in Sweden. And you would still have money left over.

[Kurtz79]

"That’s what Apple usually does: they keep roughly the same digits, and change the currency."

It makes no sense comparing US and EU prices directly, as the former are always shown without VAT (which varies state from state), and in the latter the VAT is included (which is specific to each country).

Also, price will fluctuate even across EU countries, on account of different VAT taxes in the individual member states, so that Apple "keeps the same digits" it is simply not true, as a rule:

iPhone X 64GB USA(no VAT): 999$ https://www.apple.com/us_kiosk_5000012/shop/buy-iphone/iphon...

iPhone X 64GB Italy (VAT 22%): 1189€ https://www.apple.com/it/shop/buy-iphone/iphone-xs

iPhone X 64GB Spain (VAT 21%): 1159€ https://www.apple.com/es/shop/buy-iphone/iphone-xs

The only way to compare them is to remove VAT, for example in the case of Italy:

1189/(1+0.22)= 974€ -->> 1100$ (current exchange rate).

So, there is about 10% difference, which could be (partly) accounted for due to the different warranty requirements in EU.

EDIT: Fixed math

[simonh]

Nice analysis. If you factor in local sales taxes in the US, that 10% difference shrinks or even disappears pretty fast.

I'm afraid 'Apple charges more abroad' is largely a fallacy. Where there is a difference, it's almost always pretty clearly due to local taxes or costs of doing business. This used to really piss off Steve J[1] because he saw it as terribly unfair.

[1] https://www.imore.com/steve-jobs-international-ipad-pricing-...

[xxs]

Sweden is still in the EU, it has higher VAT than (say) Germany as well. Also iphone x is ~865 on amazon.de[0]. You can order with within the EU (see the 1st sense again), the delivery would be around ~10€, but the price is to be a bit higher due to VAT diff. Side benefit of amazon is that you will never need to deal with apple repair services as you can send the goods back to amazon.

US price has no sale tax (which varies per state and county)

To sum up: if you find the goods at any retailer in the EU, buy them online and pay for the delivery - for light products (electronics), the shipment costs are low when not 'free'.

[0]:https://www.amazon.de/Apple-iPhone-X-64GB-Space-Grau/dp/B075...

[xorcist]

Note that within the EU, as soon as you sell over a certain limit to a member country you have to charge VAT in the destination country. So large retailers will list prices with their respective VAT included and then re-calculate prices when you get to the payment stage (when they know which country you order from).

[jrockway]

Canada: $1379. (On the $999-in-the-US iPhone XS.)

They do not always use the round numbers.

[ido]

Seeing as most Canadians live near the US border maybe they go closer to American prices there as there's a lower barrier for Canadians to cut the fat margins by crossing the border and buying in the US?

[mrunkel]

Including VAT and import duties? I find that very hard to believe.

[mstade]

Open the box and plug it in while in the states. Now it’s just property you brought along, not imported goods, so no duties to pay. I ain’t no lawyer though, and this is just advice I’ve been given in the past, so mileage may vary etc. (I wouldn’t be surprised if it’s entirely wrong, someone please correct me!)

[drakenot]

I believe it would reduce the import duty on the devices manufactured in India.

[Matheus28]

Exactly. When Apple started manufacturing some of their phones in Brazil, the prices didn't change, but their profit margin sure did.

[sharmi]

A significant portion of the cost is because of import taxes. They usually are high but have been increased further of late.

[novaleaf]

indeed, I recall being in Thailand where HD's are (were?) built, and buying one still costed aprox 2x the price in the USA.

[zuron7]

The company manufacturing on the outskirts of Bangalore is Wistron. Not Foxconn.

[vijaybritto]

The glory days of iPhones are over.Its gonna be 10k less than the existing one and it's still for top 1 or 2 %

[dan-robertson]

The top 1% of India is about 13 million people so it isn’t necessarily crazy for apple to only target a small proportion of the population.

[Abishek_Muthian]

Due to massive taxes for pre-built smartphones and less taxes for components(A tactic effectively employed to pressure manufactures to make their phone in India), top tier iPhones cost the highest in India. When these are manufactured in the country, it should match the price of other countries.

But that doesn't mean it will become affordable, Apple has positioned itself as a luxury brand & is said to have the largest markup among smartphone manufacturers.

Indians looking for cost/value will always have better alternative, but for those 'Who value themselves upon what others see in their hands' will burn lesser cash than before.

[tinus_hn]

If it were cheaper to build iPhones in India Apple would have been doing that from the start. If you’re lucky prices will remain the same but they probably will go up.

[ignoramous]

> Tired of paying a premium for Apple products in India.

I might be wrong but, I think, OP might be referencing to the fact that phones manufactured in India are exempt from import tarrifs (cross trade avg of around 14%).

https://www.export.gov/article?id=India-Import-Tariffs

[tinus_hn]

The price of the phone is not based on tariffs. We’ll see.