Why Xiaomi will Make in India and Apple won’t

Indian Prime Minister Narendra Modi is touring the world again to sell the Indian dream. His ‘Make in India’ initiative promises to boost the Indian manufacturing sector from 17% to 25% of India’s GDP by 2020.

Around 60 Chinese smartphone companies have invaded the Indian market in the last 2 years. Companies like Xiaomi, Meizu, Coolpad and Gionee are making it big here. The reason is simple – top-of-the-line features at crazy prices.

However, while a host of Chinese brands are queuing to grab a slice of the world’s largest smartphone market, there are solid reasons why Apple won’t make in India no matter how hard NaMo tries.

A closer look at the Indian smartphone market would reveal why:

India’s Mark-sheet:

· Xiaomi joined hands with Foxconn and started to ‘Assemble in India’ since last month (August).
· Lenovo partnered with Flextronics this August to ‘Assemble in India’.
· OnePlus is also toying with ‘Make in India’ plans. It is looking to launch an India-special smartphone by end 2015.
· Meizu plans to manufacture in India with Foxconn.
· Oppo and Vivo would also ‘Make in India’ by end 2015.

What has worked for Chinese brands?
While the Chinese smartphone market is slacking, India’s is soaring. Smartphone shipments in China fell by 4% but in India they grew 44%.
Here’s what has worked for Chinese smartphone brands:

· 2 to 20% subsidies on amount invested
· Easing FDI (foreign direct investment) regulations
· Cheaper labour in India (Avg. hourly labour cost Rs. 60.81 in India vs. Rs. 232.65 in China)
· Closer to a large consumer base
· 4G enabled smartphones selling like hot cakes, thanks to India’s 4G rollout

What hasn’t:
· Average smartphone prices lower, i.e. thinner profit margins
· Upgrade to smartphones relatively slower
· Competition from Indian brands like Micromax, Lava, Intex and Karbonn that make up 35% of the market
· Securing land for factories is a pain
· Taxes aren’t streamlined yet. Sales tax varies from State to state, and ends up raising input cost

Your iPhone questions answered:
Here are the answers to some of the most common questions about why Apple won’t Make in India answered.

Why can’t Apple Make in India. After all, so many brands are!
India is a small market for Apple. If there’s no demand, there’s no need to supply more. Simple. Just in case the demand rises suddenly, China is not that far, honestly.

But they can use India as an export hub, right?
Wrong. India’s poor logistics infrastructure makes transportation inefficient. Only 50% of the country’s roads are paved, and horrible traffic means goods never reach on time.

But iPhones would get cheaper, duh!
Apple would save around 11% on shipping. If Apple opts to carry that savings to the buyer (which is up to the company, really), iPhones would only get Rs 5,000 less expensive. Not a big deal for the company, or people who can afford its pricey gadgets.