Apple and Wistron to Cooperate on Smartphone Assembly Plant in India
February 13, 2017 In the middle of last week, news broke that the state government of Karnataka (state in India where the city of Bangalore/Bengaluru is located) had reached an agreement with Apple to allow the latter to set up a assembly/manufacturing plant with Wistron. Over the weekend, Priyank Kharge, IT minister for Karnataka, said that he believed Apple would "tentatively begin manufacturing iPhones in the state by the end of April or beginning of May." After reaching the saturation point in smartphone sales growth in China and the U.S., Apple is left with India as its next growth frontier. That is not to say that Apple will not make gains in China and in the U.S however, in these countries the fight is now for market share. It's a zero-sum game for Apple in China and in the U.S. On the other hand, in India, the market is wide open and at the moment is dominated with cheap handsets that cost between $100-$250 per unit. eMarketer estimates that barely 20% of the almost 800 million cellular handsets in India are smartphones, so the market is wide open for mid-to-high-end smartphones in India. Market research firm Counterpoint stated that Apple was the 10th-ranked smartphone manufacturer in terms of shipments in India in Q4 2016. The firm estimated that Oppo, Vivo and Xiaomi dominated the Indian smartphone market with a combined share of 47% in Q416. Counterpoint also noted that Apple controlled 62% of the market share for devices priced above $650. Even that $650 per unit price point is out of reach of the Indian masses however with the already massive middle class (400 million and growing) having easy access to monthly payment options, a price point a bit lower could allow Apple to capture share rapidly. Apple phones are considered the Rolls Royce of smartphones in most of Asia and India is not an exception by any means. In terms of market share of the overall smartphone market in India, it is estimated that Apple has just a 2%-4% market share at the moment. Some believe that if Apple can get the cost of locally assembled/manufactured phones down low enough to start its entry-level models at $375-$450 per unit, the potential explosion in sales could go a long way in countering slowing demand in China and elsewhere in the West. However, the cost of assembly is a minor part of the overall cost, which is dominated by component charges. India is one of the fastest growing economies in the world and is a country that Apple cannot afford to overlook, especially as the introduction of VTE is just beginning. Apple hopes the assembly plant in Bangalore will help Apple compete in the high-end market that may be ready to break out in India. |
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