Apple detailed Indian iPhone manufacturing demands to Modi in October letter

Shedding light on Apple's efforts to break into the burgeoning Indian smartphone market, a letter sent to Prime Minister Narendra Modi in October outlines the company's request to "make the environment attractive" for iPhone production and export.

As summarized on Wednesday by Reuters, the letter contains a list of seven demands, or "pre-requisites," the company deems necessary to jumpstart iPhone manufacturing in India.

Some, like tax breaks and duty exemptions on raw materials and equipment for manufacturing, have already been reported as key to Apple's ongoing negotiations with the country's government. The newly divulged letter, however, offers a fresh look at the company's behind-the-scenes tactics and expands on prior information from secondhand sources.

For example, the duty exemption Apple seeks covers more than materials and components, but also capital equipment for 15 years for domestic and export markets.

In addition, the company wants a relaxation of regulations that currently prohibit the import of phones older than three years old. The change would allow Apple to import older iPhones, repair them at Indian facilities and export the hardware back to international customers. Repairs and continued after sales support are crucial in maintaining iPhone as a platform, Apple said.

The letter also requested the government's assistance in pushing through a request for a ruling from Indian tax authorities that would allow Apple to transfer pricing agreements between affiliates.

India's customs process was another topic, as Apple sought a loosening of strict procedures that could stand as hurdles to future manufacturing operations.

"For trusted traders inspections need to be less intrusive — this means less boxes opened," Apple wrote, according to Reuters. "The complete process should not require more than thirty minutes."

Each of the demands outlined in Apple's letter is designed to cut through red tape that stands in the way of manufacturing iPhone in India, which itself is a hurdle to lowering hardware prices in a bid to spur local sales.

That Apple is making a serious play for India is no secret. Just today, the country's Information Technology Minister, Ravi Shankar Prasad, said his government will adopt an "open mind" when it examines Apple's requests.

Producing even a fraction of Apple's massive iPhone orders in India would be a major economic boon for the country. Further, an Apple presence would advance Modi's initiative to groom India into an investment mecca.

Whether India will adhere to Apple's demands or broker different arrangements has yet to be seen. Company executives are scheduled to meet with officials later this month to discuss conditions of setting up shop, which according to the letter involves iPhone manufacturing, Apple retail stores, pre-owned iPhone imports and local refurbishing capabilities.

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17 Comments

anantksundaram 20391 comments · 18 Years

About 7 years ago

All of these sound like very basic and reasonable 'demands,' probably ones that anyone contemplating serious manufacturing of consumer electronics in India would ask for. If the Indian government can't oblige, chances are low that they'll get any significant investments in manufacturing.

uroshnor 99 comments · 13 Years

anantksundaram said:

All of these sound like very basic and reasonable 'demands,' probably ones that anyone contemplating serious manufacturing of consumer electronics in India would ask for. If the Indian government can't oblige, chances are low that they'll get any significant investments in manufacturing.

The Indian government is notoriously bureaucratic, and whilst India has had significant foreign investment in the services area (although that is dropping away), it has frequently struggled with attracting foreign manufacturing. Indeed, companies have pulled out of major deals over the nature and extent of government demands (eg JAS39 Gripen ).

Its not crazy that the whole thing falls through

gatorguy 24609 comments · 13 Years

anantksundaram said:

All of these sound like very basic and reasonable 'demands,' probably ones that anyone contemplating serious manufacturing of consumer electronics in India would ask for. If the Indian government can't oblige, chances are low that they'll get any significant investments in manufacturing.

I had thought the big US techs like Google, GE, Amazon etc. were slowing backing away from transfer pricing and the PR issues that it has caused in the past couple of years. Apparently not since Apple wants to move the same tax avoidance policy to India, creating another virtually tax-free branch of the Apple tree? So much for "bring it all home" with tax repatriation legislation.

At some point the various economic regions are going to have to come together to work out an agreement on how huge multinationals and their tax situations should be handled. If not expect more anger from the general public about tax avoidance schemes only available to the already wealthy.

uroshnor said:

anantksundaram said:

All of these sound like very basic and reasonable 'demands,' probably ones that anyone contemplating serious manufacturing of consumer electronics in India would ask for. If the Indian government can't oblige, chances are low that they'll get any significant investments in manufacturing.

The Indian government is notoriously bureaucratic, and whilst India has had significant foreign investment in the services area (although that is dropping away), it has frequently struggled with attracting foreign manufacturing. Indeed, companies have pulled out of major deals over the nature and extent of government demands (eg JAS39 Gripen ).

Its not crazy that the whole thing falls through

A sample of comments from other officials involved in approving any deal with Apple:

"We have not done this for anyone," said a senior government official whose department is one of several involved in evaluating the Apple proposal. (Note: Samsung and Xiaomi have already set up manufacturing in India) "If we do this, we must see a lot of value addition."

Another official involved in the review said the government should make policies for the industry, not individual companies.

"Apple is coming here because it sees a lucrative market, this is not a favour being done to India."

It won't come easy.

1st 428 comments · 18 Years

excellent. All of the company should have a good legal/logistic/finance dept like this. Lets see what Gov say. if all the country follow the letter, it would be wonderful for MFG and Tech. Go Apple! flex your muscle, make the world better place ;-).