India’s government, after meeting with Apple’s CEO last week, has told the iPhone maker that it will have to meet the country’s 30 per cent local sourcing rule for it to operate its single-brand stores in India.
Apple currently has no branded retail stores in India and sells its devices through third-party resellers. It plans to open at least three Apple Stores in the country by the end of next year.
Apple has been pushing the government to ease its domestic sourcing requirement if it receives approval to open Apple Stores in India. The company last month put its case to the Department of Industrial Policy and Promotion on why its products should be exempt from local sourcing rules.
The country’s local sourcing law requires foreign firms with single-brand outlets to source 30 per cent of the sales value of the components from India within five years of starting operations. But foreign direct investment regulations allow the government to relax the rules for firms “undertaking single-brand retailing of products having state-of-the-art and cutting-edge technology and where local sourcing is not possible”.
A government official told the Economic Times that “there was no substantial backing to the claim that there was cutting-edge technology”. The person noted that a broad policy needs to be in place to define what is cutting edge. “It has to be there upfront in the policy. Otherwise it would be open to discretion and charges of corruption.”
Chinese vendors LeEco and Xiaomi also have requested exemptions to the local content rules.
Apple faces other difficulties in the country, which is the third largest smartphone market in the world and one of the fastest growing. Earlier in the month Indian authorities rejected Apple’s request to sell used iPhones.
Apple CEO Tim Cook, on his first trip to India last week, has embarked on a major charm offensive with the country. The company announced plans to open a new facility in Hyderabad to work on its Maps products and it will establish a design and development accelerator in Bengaluru, described as “the home of India’s startup scene”, to support engineering talent and accelerate growth in the country’s iOS developer community.
It also worked out a long-term sourcing deal with Reliance Industries that will see the US firm supply VoLTE-capable iPhones directly to mobile newcomer Reliance Jio.