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Home >Home-page >Why Apple’s India setback on tax breaks is far from a defeat
India is not eager to give more ground to Apple because of the precedent it would send. Photo: Reuters
India is not eager to give more ground to Apple because of the precedent it would send. Photo: Reuters

Why Apple’s India setback on tax breaks is far from a defeat

According to a media report, Wistron is set to be the company that will fly the Apple flag when it starts Make in India iPhone assembly in April

Taipei: To open single-brand stores, foreign companies must buy 30% of their components in-country. Round one of the Apple-India tussle ended with victory for the visitor when officials announced a three-year grace period on that stipulation back in June.

Now round two is underway, with Apple seeking tax concessions, including lower import and manufacturing duties, Shruti Srivastava of Bloomberg News wrote last week. India doesn’t look eager to give more ground because of the precedent it would set, Srivastava wrote Tuesday.

That puts the ball back in Apple’s court, with the world’s largest company able to trade its three major assemblers—Foxconn Technology Group, Pegatron Corp. and Wistron Corp.—off against each other. Whichever of the Taiwan trio is most eager and able to take one for the team in India would secure itself huge brownie points in Cupertino.

According to The Times of India, Wistron looks set to be that company and will fly the Apple flag when it starts “Make in India" iPhone assembly in April. With most of the supply chain still in China, and manufacturers facing dozens of challenges to operate in India, my sense is that Wistron would employ what I call the Brazil Solution.

Instead of a fully fledged soup-to-nuts manufacturing operation, Foxconn (aka Hon Hai Precision Industry Co.) helped Apple get around Brazil’s import tariffs by shipping partially assembled iPhones to the South American nation for local workers to slot together like Lego.

Assuming The Times of India report is correct, it’s possible that Apple agreed to pay for some or all of the equipment to be installed by Wistron, a strategy the California company has deployed on and off for more than a decade. In return, such facilities cannot be used to make products for competitors. Given the iPhone’s annual cycle, this could result in a lot of idle time for Wistron in a country where laying off workers is extremely difficult.

As the smallest of the three iPhone assemblers, Wistron can least afford the cost of setting up a dedicated Apple plant in India because electronics manufacturing is all about economies of scale (I doubt Foxconn’s Brazil operation made much money). Yet it’s also got a lot to gain by being the most eager to take on the task. The terms of the contract between Apple and Wistron—and what was offered to other partners—will be one of the industry’s best-guarded secrets.

Whatever the deal, such a move is just the kind of concession from Apple that Indian officials need to take back to their constituents so they can give ground elsewhere, including on tax breaks and product-labeling requirements.

After years of doing business in China, Tim Cook has learned a lot about giving and saving face. Now it looks like he’s deploying those lessons in India. Bloomberg

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