Business

Apple Prioritizes iPhone Production In India, Put Plans For iPads And MacBook On Hold

Apple has refused to participate in the revised IT hardware production-linked incentive (PLI) scheme, said government sources. It stated that it remains committed to manufacturing only iPhones in India. As a result, the company has currently decided against producing iPads and MacBooks in the country.

The government anticipates a possible change in Apple’s position in the future, which is why the upcoming revised IT hardware production-linked incentive (PLI) scheme may have a longer tenure of eight years instead of the typical five or six years. Under this scheme, companies can choose any six years to qualify for incentives after meeting the prescribed targets. According to government sources, Apple could potentially join the PLI scheme two years after its launch, given this flexibility.

Apple’s Global Turnover

Apple has reported that out of its $394 billion global turnover for the year ending September 2022, iPhones accounted for approximately $205 billion. As a result, it is logical for the company to focus on expanding its smartphone production in India. However, the company is confronted with an additional obstacle in manufacturing iPads and MacBooks in India, as it lacks a Taiwanese contract manufacturer for these products. Currently, Chinese vendor BYD Electronic International is responsible for manufacturing iPads and MacBooks.

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Apple had previously considered manufacturing iPads and MacBooks in India. In January 2021, BYD was expected to establish a factory for this purpose. However, the government, following the Indo-China border clashes in 2020, has taken a tough stance against investments by Chinese companies and did not grant permission for BYD to establish a factory in India.

As a result, BYD set up an iPad and MacBook factory in Vietnam in September 2022, making it unlikely for the company to establish a manufacturing unit in India, even in partnership with an Indian firm.

Another factor that may be dissuading Apple from participating in the IT PLI scheme at present is the global slowdown in demand for personal computers. Other prominent IT hardware players such as HP, Lenovo, ASUS, and Acer have also suggested to the government to either postpone the scheme or exempt the minimum investment requirement.

IDC India has estimated that global PC shipments decreased by 16.5% in 2022, while the Indian market grew marginally by 0.3% to 14.9 million units during the same period.

Manufacturers may not see much benefit in establishing bases in India at present, as their existing factories in China, Thailand, and Vietnam can fulfil demand at cheaper rates with an established component supply chain.

Response to the PLI Scheme

Industry experts have conveyed to the Ministry of Electronics and Information Technology that the timing of the PLI scheme for IT hardware 2.0 may not align with global trends. Given the challenges that many companies face, along with the significant decrease in demand for IT hardware products as the pandemic recedes and the economic recession in the US and Europe, which is likely to lead to a decline in demand for such products in India, it might be better to postpone the scheme until conditions improve. They have cautioned that it might be wiser to avoid investing additional funds in a scheme that has already failed once and could encounter difficulties again.

The first IT hardware PLI initiative, which commenced in April 2021, did not deliver the desired outcomes. Consequently, the government is devising a new scheme with modifications to the incentive structure. Only Dell and Dixon were able to qualify for incentives at the end of the first year under the existing scheme, while Wistron, Flextronics, and Rising Star were unable to meet the incremental production and sales targets.

Despite reports that the new draft scheme has raised the average incentive from 2.3% to 5.34%, Dell and HP, which have direct or third-party manufacturing operations in India, have expressed their unease with the government. It is over a clause mandating a minimum investment of ₹700 crore.

Shruti Rag