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Pegatron to manufacture iPhones in India from April

Taiwan’s Pegatron, Apple’s second largest contract manufacturer, has set a target of producing goods worth more than Rs 8,000 crore in India in the next fiscal year starting April. The company plans to start local manufacturing next month, which will help deepen the iPhone maker’s presence in the world’s second largest smartphone market.

The third contract manufacturer for Apple to set up shop in India — after Taiwan’s Foxconn and Wistron — will initially roll out iPhone 12 devices, followed by the new iPhone 13 series from a new facility in Tamil Nadu, said people familiar with the matter. The company is expected to employ close to 6,000 people over FY22-23, as it ramps up production.

“Pegatron will soon commence production and it has submitted its estimated production for the year with the government, and a significant portion produced will be for exports,” one of the people, directly aware of the matter said.

Pegatron follows the other two iPhone manufacturers — Foxconn and Wistron — that have already started production under the production-linked incentive scheme (PLI) for smartphones and are likely to avail of the first-year benefits by the end of March. Currently, more than 70% of Apple’s iPhones sold in India are assembled locally.

Pegatron has to invest Rs 250 crore in order to be eligible for the incentives for the second year. Also, it needs to produce goods worth Rs 8,000 crore in the second year, followed by Rs 15,000 crore, Rs 20,000 crore and Rs 25,000 crore of production in the remaining three years under the five-year programme.

Under the PLI scheme, if the company meets the targets, the government will pay 6% of the cost of production as incentive in the second year, 5% in the third and fourth years, and 4% in the fifth year. The total pool of incentives to be given out is limited to Rs 40,995 crore.

Navkender Singh, research director at IDC, said looking at the strong performance of Apple in India in 2021, specifically iPhones, Pegatron contributing a million-plus unit shipments next fiscal year was “not entirely unrealistic.”

Apple was among the fastest growing brands in India in 2021 with shipments growing 108% on-year to a record of 5 million units, or a roughly 4% market share, driven by wider local manufacturing backed by aggressive marketing to tap into strong demand, said market trackers. They expect 2022 to be an even stronger year for the company, on the back of a larger manufacturing presence given that Pegatron would also start contributing, and also because of the recent launch of the iPhone SE 2022 and its broadest iPhone portfolio across price tiers.

“Apple can possibly take advantage of whatever cost savings it gets from higher local manufacturing to give aggressive pricing on previous generation models during the high volume festive season in the second half of the year,” said Singh.

The development comes at a time when Foxconn, along with a host of other international manufacturers, has suspended their production in China which is grappling with a fresh Covid outbreak, triggering lockdowns in many regions, including Shenzhen that accounts for under 20% of Foxconn’s total iPhone manufacturing capacity. Market trackers say this may well be an opportunity for India in offering an alternative destination for producing Apple products.

“While this (China lockdown) will be helpful in the near term, India needs to do more in areas like labour laws, scale of operations permitted, etc., for the long-term positioning as a serious alternative to China,” Singh said.

He said Indian laws and regulations needed to facilitate setting up of large manufacturing units with up to 100,000 workers for the country to truly capitalise on the opportunity.

Communications and IT minister Ashwini Vaishnaw in January had said the country was working to facilitate setting up of large factories and the relevant changes to labour laws. B2B Chief

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