Wistron controversy unlikely to impact Apple’s expansion plans in India 

When Tim Cook visited India in 2016, the first time after he took over from Apple’s maverick founder Steve Jobs, India’s standing in the tech major’s priority list was low. Apple was importing all its devices and its market position was sliding, even though the Indian smartphone market was closing in to overtake the US.

Cook was eager to advance Apple’s old plan of turning India into a major refurbished iPhone hub. It was a plan the government had been rejecting since the late-2000s — and it was turned down again. The multi-city trip, which included meetings with chief ministers of several states and the Prime Minister, finally brought home the message to Apple’s top management. If Apple wished to bring the Indian consumer market in its fold, it needed to go local. Setting up local manufacturing units and investing in retail expansion would be imperative for its growth in a market that has been flooded with cheaper Chinese handsets.

According to Cook, the country’s potential as a manufacturing hub with a vibrant youth population and its app developer ecosystem were some of his biggest learnings from the trip. Soon after his departure, in late-2016, Apple began the second leg of its India journey with locally made iPhone SE (1st generation) that changed its fortunes with record sales over the next few quarters.

Since then, Apple has changed tack. It has brought in two of its long-term contract manufacturers — Foxconn and Wistron — launched an Online Apple Store and finalised a blueprint for the much awaited Apple Store. From a small exports market that played second fiddle to the markets in North America, Europe and China, India now features at the top of Apple’s priority list. And with the US and China locked in a global trade war, India’s fortunes are only set to rise in Apple’s manufacturing plans.

The recent incident at Wistron’s Kolar (Karnataka) plant, when workers went on a rampage over the non-payment of wages, may have dented its image as an employer. But it is unlikely to alter Apple’s long-term plans for the market, say insiders. According to sources privy to the developments, the company’s prompt damage control exercise is itself a testimony to its commitment to the market. “There has been minor damage and they will no way change the expansion plans”, a person told Business Standard soon after the incident, even though initial estimates were suggesting otherwise.

Unlike initial predictions, insiders said the firm was busy controlling any potential damage to its image and was in talks with the authorities to eliminate any differences between workers and management. With the Prime Minister’s Office (PMO) directly involved, Apple has moved quickly with punitive measures — such as putting Wistron on probation and pressuring the contract manufacturer to dismiss its vice-president — to put the controversy to rest.

“India is the market for Apple for the next decade. It is the only major market that is growing and with Apple shifting its manufacturing base here, coupled with its retail expansions, its growth story is just beginning,” said Navkendar Singh, research director at IDC.

Sources said the incidence is just a small blip that is unlikely to alter its long-term bet.

Apple’s largest contract manufacturer, Foxconn, with two manufacturing facilities here — in Telangana and Tamil Nadu — is planning to invest an additional Rs 7,500 crore ($1 billion) to expand iPhone production capacity. With an India-made iPhone 12 out by April 2021, Apple is expected to narrow the gap between its global launch and locally made smartphones in 2021. During the past two years, it has rolled out its latest iPhone models — XR (in September 2019) and 11 (in May 2020) — ahead of their launch.

The Wistron controversy may delay its plans for iPhone 12 Mini, scheduled for May 2021, sources said, but Apple is making new arrangements with Foxconn to cut any delay in production. The smaller version of the newly launched iPhone 12 series has great potential in the local market. The previous model, iPhone SE (2020), launched in April and being made locally since July at the Wistron plant, has already become the second-most sold iPhone model after iPhone 11.

Apple’s latest success in India, which includes a record 800,000 units of iPhones sold in the September quarter, is attributed to its locally made devices that help it save 25 per cent on its cost of procurement. And Apple is in no mood to concede ground here, as all major markets such as the US, the UK and China continue to register de-growth.

In fact, it is now gearing up to welcome its third major global partner, Pegatron, which recently bagged approval for its greenfield investment plan. The Taiwanese manufacturer is yet to finalise the location of its plant, but sources say the firm is in advanced talks with the governments of Tamil Nadu and Karnataka. Pegatron, Foxconn and Wistron are expected to roll out close to Rs 6 trillion worth of smartphones by 2025. These will include exports worth Rs 3 trillion.

“The PMO is closely tracking the developments related to Make in India that are now unfolding its full potential. The Wistron factory incident attracted their attention immediately. So far, all issues have been discussed and an amicable solution has been reached,” said a senior central government official.

Sources point to the importance Apple bears in the global arena and India’s preparedness in attracting the American firms as they move out of China. The top three suppliers of Apple, for example, have set a target of moving 40 per cent of their China production capacity. “It is a mutually beneficial move. And setting up base in India is as important for Apple as it is for India”, said Faisal Kawoosa, lead analyst at TechArc. Business Standard