Apple reportedly absorbs rising costs for making iPhone 15 in India

Jingyue Hsiao, DIGITIMES Asia, Taipei 0

Credit: AFP

The made-in-India iPhone 15 shows how Apple is trying to win the world's second-largest smartphone market and reduce its reliance on manufacturing in China. According to statistics, Apple and its manufacturing partners may decide to absorb the higher costs of making handsets in India.

Business Standard quoted sources involved in the production of iPhones saying that the incentives of an average of 4–6% on incremental sales for handsets made in India are not enough to make up for the high cost of 7-8% for making handsets in India than in China.

Besides, sources told Business Standard that to assemble iPhones in India with about 15% value addition, manufacturers have to import components for assembling, on which the Indian government imposed basic customs duty, increasing the bill of material cost by 7-8% or about 5% on freight on board (FOB) value, while China imposed zero duty on imported handset components. According to India's official data, for imported handset parts with HS code 851719, a 20% basic customs duty is levied.

It is to be noted that for components not made locally, India announced a reduction of basic customs duty for the camera lens and their inputs or parts in February.

According to the report, Apple and its suppliers absorb the rising costs, including the higher distribution cost in India than in the US, as Apple has much fewer self-owned stores in India and has to pay retail margins to resellers and distributors for selling iPhones. Apple did not pass on the cost of the GST of 18%, as the indirect tax is borne by consumers.

Meanwhile, Ivan Lam, senior research analyst at Counterpoint Research, said India is expected to export about 22% of its total assembled mobile phones in 2023. Still, suppliers in China remain essential in the handset supply chain in the foreseeable future.

In late September, V. Lee, the Foxconn representative in India, said in a LinkedIn post that the group aims for another doubling of employment, FDI, and business size in India, and PTI reported that Apple may scale up its production value by about five times in the next five years.