Why are Made-in-India Phones So Expensive?
When Apple had announced that it would be making the iPhone 15 in India, the whole country thought that this would bring down the cost of the flagship phones for everyone in the country. But much to everyone’s surprise, it didn’t really turn out that way. Now, even Google is heading the same way and there seems to be no reason to assume otherwise. At the Google for India 2023 event in New Delhi, Google declared its intent to manufacture the flagship Pixel line-up of phones in India, following the path laid by Apple, which had followed the footsteps of Samsung. However, despite the increasing local production of smartphones in India, iPhone prices in the country remain significantly higher compared to other countries like the US, Dubai, and Singapore. Even made-in-India phones, such as OnePlus, which is ramping up India manufacturing, sells at a higher price here. The latest Google Pixel phones are most expensive in India. pic.twitter.com/O5Cu2GX8cS— Dr. J (@just1doctorwala) October 10, 2023 This apparent paradox reveals the multifaceted nature of smartphone pricing, with various factors contributing to the disparities in prices. Not entirely “Made in India” Firstly, it’s crucial to understand that iPhones are not entirely “made in India”. Instead, they are assembled in the country, and the supply chain for iPhone production still relies heavily on components imported from other regions. This reliance on imported components makes Apple subject to customs duties, which inevitably have a direct impact on the final prices. Additionally, the Goods and Services Tax (GST) of 18% further contributes to the overall cost, leading to a cumulative price increase of approximately 40% compared to the base price of the imported models. Though the GST was reduced to 12% in July, the pricing did not drop much because of other factors. Apple’s approach to the Indian market differs from its strategies in other countries. Apple has limited collaborations with local banks in India for providing convenient financing options. Furthermore, trading in a year-old iPhone at an Apple store in India typically yields only about one-third of its original value, making the upgrade path less financially attractive for consumers. Despite these challenges, Apple has devised strategies to mitigate the impact of heavy customs duties and taxes on imported models. The company has partnered with local companies to provide discounts and trade-in options. This also includes Tata. These initiatives help make iPhones more affordable for Indian consumers and, to some extent, level the playing field with their international counterparts. Thus, the company is also planning to scale up production in India by five fold. Another notable aspect to consider is that older-generation iPhone models significantly drive Apple’s sales in India. Analysts suggest that the profit margins earned from the sale of premium Pro models help subsidise base models and older-generation iPhones, making them more competitively priced in India compared to countries like Dubai and Singapore. This strategic pricing approach aligns with Apple’s broader business model of offering a diverse range of products to cater to various consumer segments. Furthermore, despite the significant increase in the number of iPhones assembled in India over the years, not all models are produced domestically. Only a few iPhones before 14 were assembled in India. This limitation prevents Apple from implementing dual pricing tiers, one for locally assembled iPhones and another for those imported. As a result, pricing disparities between locally assembled and imported iPhones remain relatively marginal. Not the phone makers’ fault It’s also important to note that the pricing stability of flagship smartphones is not unique to Apple. Other smartphone brands, such as Samsung, Oppo, Xiaomi, and Vivo, have also set up manufacturing facilities in India, producing flagship models locally. However, the prices of flagship devices across these brands have remained relatively unchanged over the years, highlighting the overall pricing dynamics in the Indian smartphone market. Apart from Apple, the fluctuation in international currency exchange rates can impact the pricing of smartphones in India. The value of the Indian rupee, in particular, has been depreciating against the US dollar over the past year. This depreciation has contributed to the higher pricing of the iPhone 15 in India, reflecting the cost challenges associated with importing components and the cumulative effect of taxes. Many factors contribute to these price disparities. A key Apple distributor pointed out, “One of the reasons is the supply chain, as several components are shipped after the payment of import duty. Also, the scale of business in India is much less when compared to strong volumes in the US and Dubai.” This highlights the cost and logistical challenges of operating in a vast and diverse market like India. When it comes to Google, given the market share is less than 1% because of other competitors that offer Android support, Pixel 8 will end up with the same fate as iPhone 15.
“Why do I have to keep asking my American friends to get me an iPhone?”
Despite the increasing local production of smartphones in the country, phone prices in India remain significantly higher compared to other countries
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Mohit writes about AI in simple, explainable, and often funny words. He's especially passionate about chatting with those building AI for Bharat, with the occasional detour into AGI.