Apple Won’t Set Up Stores In India If 30 Percent Sourcing Rule Stays

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Apple won’t set up company-owned stores in India if the government doesn’t exempt it from sourcing materials locally.

That’s because Apple has no immediate plans to manufacture devices in India or buy parts from vendors in the country, said two persons with knowledge of the matter.

The 30% sourcing commitment is stipulated under rules for foreign investment in single-brand retail but can be waived if products involve ‘cutting-edge’ tech. Apple had applied for an exclusion but this was denied by the Foreign Investment Promotion Board ( FIPB ).

Apple CEO Tim Cook said during his recent visit that opening its own stores in India is a key element of the vision for what he sees as one of the most important markets for the iPhone maker in terms of setting benchmarks for sales and service.

The company, however, wants permission to set up stores without conditions attached, said the two people cited above. Since the idea behind the local sourcing rule was to create jobs in India, that aim has already been achieved with Apple lining up two big investments in the country, they said. One is a map development centre in Hyderabad that will create up to 4,000 jobs and an app design and development accelerator in Bengaluru.

iphoneBesides this, more than 6.4 lakh people in the country already work on app development and other roles related to the Apple ecosystem, said the two persons.

“Apple wants a no-obligation clearance for setting up its stores, since it is not sure about manufacturing anything in the country immediately,” said one of them. “It had plans to refurbish iPhones in India and sell it to consumers, but since the proposal has been turned down, local activity around it too is not going to happen.”

The company didn’t respond to an email sent on Monday.

Commerce and Industry Minister Nirmala Sitharaman said on Monday she will press the finance ministry to waive the sourcing rule for Apple. FIPB itself has asked the Department of Industrial Policy and Promotion (DIPP) for a definition of the term cutting-edge, ET reported Tuesday.

The government is likely to take a final decision soon. But on Apple’s proposal to sell refurbished phones, Sitharaman said the government wasn’t in favour of this.

On his recent visit, CEO Tim Cook had indicated the importance Apple attached to the country, saying that it plans to be in India for a long time.

He said selling refurbished phones would allow people to become part of the Apple ecosystem at a lower price point. But Indian ministers have objected to this, some deeming it equivalent to the dumping of e-waste. Cook has said it’s akin to selling a used car but with the manufacturer’s certification.

During his meeting with Prime Minister Narendra Modi , the prospect of Apple setting up production facilities and its own stores in India were reported to have come up for discussion. Apple’s factories are mostly located in China with Foxconn being its main contract manufacturer.

Apart from the US, it also has manufacturing units in Brazil and Ireland. Rival Samsung currently manufactures and assembles its entire smartphone portfolio in India.

During his visit to India, Cook told employees that a direct retail presence in the big cities would be vital to set standards.

The company currently sells iPhones, iPads, Mac computers and Apple TV through distributors who supply to franchise-owned exclusive stores, retail chains, neighbourhood cellphone stores and eCommerce websites.

Source: http://economictimes.indiatimes.com

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