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India backs down under corporate pressure, delays import tax on smartphone touch panels

Originally set to take effect this month, the Indian government has postponed a tax on touch panel imports that would have impacted smartphone makers like Apple and Samsung.

iPhone 6s touch panel

Assuming the Indian finance ministry agrees on a proposal by the Ministry of Electronics and Information Technology, the tax will now begin in April 2020, Reuters sources said. Under Prime Minister Narendra Modi's "Make in India" campaign, the government has been gradually increasing taxes on phone component imports as an incentive for firms to set up local manufacturing.

Apple and other members of the Indian Cellular and Electronics Association brought their influence to bear last month, arguing that the touch panel tax and other government measures could hurt their business. Samsung even wrote to the government separately, claiming it wouldn't be able to produce two high-end phones with the tariff in place.

Samsung is expected to have an Indian touch panel assembly plant open by the end of March 2020. It's unknown if that explains the window of the delay.

Despite industry complaints "Made in India" has had some success, as India is now second only to China in phone production, with firms like Samsung, Oppo, and Apple assembly partners Foxconn and Wistron setting up shop. The ICEA itself admits that "Make in India" has created over 600,000 jobs.

Apple controls just 1 percent of the Indian smartphone market, something typically blamed on a combination of low-cost competition and high iPhone prices, exacerbated by import costs. For years the company has resorted to selling outdated hardware as a workaround — Wistron, in fact, is currently assembling the iPhone SE and 6s in the country.

Foxconn is reportedly considering moving some of its iPhone production to India, which would have the dual benefit of cutting import costs and reducing dependence on China, which is embroiled in a trade war with the U.S. It could eventually pave the way for Apple opening its first Indian retail stores as the company complies with sourcing requirements.