Apple tells India to extend tax breaks to suppliers if it wants iPhone manufacturing hub

"They want the same treatment to be given to the component manufacturers; the tax concessions, they want everything. But then some kind of policy will have to be evolved," a government official said to Reuters. Other officials elaborated that the government would have to craft a new policy that would apply fairly to other device makers.

Talks have reportedly been ongoing since May 2016, when Apple CEO Tim Cook and Prime Minister Narendra Modi first agreed on plans to set up a full manufacturing hub, rather than just assembly. Apple partner Wistron has been assembling the iPhone SE in Bengalaru since May of this year, but as of today, parts still have to be imported.

Apple submitted a list of "prerequisities" in October, including a duty exemption on raw materials for manufacturing components and capital equipment for 15 years.

While its demands could unintentionally help rivals with a stronger presence in India, such as Samsung, the Cook/Modi plan allegedly involves a full range of iPhones being produced in the country, for both domestic sales and exports.

Domestic models are particularly important, since even the iPhone SE is too expensive for most Indians, owing in part to import costs. Over 75 percent of phones sold in the country are priced less than $250, whereas in June, the SE was selling locally for $342. The iPhone 7 and 7 Plus are out of reach for all but a minority.

Accordingly, Apple has just a 3 percent marketshare. To hold ground the company has even resorted to selling models considered outdated in other countries.