Apple’s technology not cutting-edge for India govt
New Delhi: Apple Inc. CEO Tim Cook’s India visit may have been in vain, with the finance ministry insisting that the maker of iPhones and iPads abide by the 30% local sourcing norm if it wants to open branded stores in India.
The industry department had recommended that the norm be waived in the case of the Cupertino, California-based company.
A government official said on condition of anonymity that the finance ministry had asked the department of industrial policy and promotion (DIPP) to review its recommendation and come out with proper guidelines defining “state-of-the-art” and “cutting-edge technology”, both qualifiers under which it had sought to waive the local sourcing condition.
An Apple spokesperson declined comment on the development.
In November, the government relaxed rules governing foreign investment in so-called single brand retail for companies bringing in what it called “state-of-the-art and cutting-edge” technology.
“There is nothing to show that Apple’s technology is cutting edge. DIPP has been asked to come out with a clear-cut guideline defining ‘cutting edge’ and ‘state-of-the-art’ technology for which such a waiver can be given. There are other companies also in the queue. It could create controversy if we waived the norms for only one without stated guidelines,” the official cited above said.
A second government official said the fact that Apple did not have a manufacturing facility in India went against it. This person also spoke on condition of anonymity.
The two aspects—cutting-edge technology and local manufacturing—should not be linked, said Akash Gupt, leader, regulatory services practice, PricewaterhouseCoopers India.
“While the finance ministry asking DIPP to formulate guidelines of what constitutes cutting-edge technology may delay the process of clearing such proposals, ultimately it will bring clarity to such investors,” he added.
Last month, a committee comprising Ramesh Abhishek, secretary, DIPP; a NITI Aayog member; and an officer from the department of electronics and information technology recommended to the finance ministry that the condition requiring single-brand retailers to source 30% of content locally should be waived for Apple, which had sought to open its own branded stores.
Chinese mobile companies LeEco and Xiaomi have also sought a waiver of the 30% sourcing norm.
In an interview with NDTV 24x7 last week, Cook said opening Apple stores in India wasn’t a done deal. “We have applied for the right to do that and we’re working closely with the government and I’m really optimistic about it. But we have not been given the green light yet.”
Cook met Prime Minister Narendra Modi on Saturday. A statement from the Prime Minister’s Office said Cook shared Apple’s future plans for India. “He spoke of the possibilities of manufacturing and retailing in India. He appreciated the breadth of young talent in India, and said the youth have significant skills which Apple would like to tap,” the statement added.
Apple currently has Apple-owned retail stores across the world, including the US, the UK, Germany, France, China and Japan.
The company sells its products in India through exclusive reselling arrangements with chains such as Imagine and iStore (owned by Reliance Digital).
Apple’s sales in India provided the only bright spot, growing at 56% as the company reported its first quarterly revenue drop in 13 years last month.
Apple’s keenness to enter the Indian market shows the increased importance of India for the company.
Its sales in India crossed the $1 billion mark for the first time last year, according to results filed with the registrar of companies.
In 2012, Apple India changed its sales model by appointing retail distributors and began advertising campaigns. Since then, its sales have been rising at double-digit pace and the top management of Apple has acknowledged the importance of Indian operations on analyst calls several times.
Apple has a minuscule market share of under 2% in India’s smartphone market as compared with rival Samsung Electronics Co. Ltd, the leader in India’s smartphone market.