Apple gains from India's surging retail market, but don't bet on a Made-in-India boost yet

Indian TV channels and newspapers are gushing this week over Apple Inc's CEO Tim Cook's high-profile visit, marked by the inauguration (finally) of company-owned stores in Delhi and Mumbai in a country where its products, notably the iPhone, have been selling for billions of dollars through resellers. 

My memories went back about 25 years ago, when I wrote a story on the visit of Bill Gates, then CEO of software giant Microsoft. The first line of my story was: Is he coming here to buy, or is he coming here to sell? 

It is time now for me to dust up that line again, this time for Cook, whose visit was preceded by a full-length Bollywood movie, Fursat, shot on an iPhone 14 Pro. This has definitely been a visit whose design matched the famous products made by Apple. A vada-pav (potato dumpling sandwich famous at Mumbai's street stalls) outing with the somewhat ageing movie star Madhuri Dixit, a badminton star in attendance, a cult evening out with a classical music-fused concert on an iPad....you get the picture. 

Look beyond the glitz now to ask why there should be so much excitement about somebody who is coming to sell products. I know that consumerism is a religion for Apple fans. The giant is said to command a 60% market share in the higher end of India's smartphone market though the overall market share for the country in its global scheme of things is just about 2%. But, as Cook himself spoke of exciting years ahead for India, his eye was on the main chance: wooing an emerging market of youth-rich 1.4 billion people with increasing purchasing power. 

Credit Suisse (now a failed company, alas) said last year in a global wealth report that India is expected to double the number of its US dollar millionaires by 2026 from close to 800,000 in 2022. That is a small number for Apple now, but the growth rate indicates that juicy times lie ahead for Tim Cook's army. Twentysomething Indians buying $1,000 iPhones is now quite common in urban India, and one marketing wizard expects an "Indianisation of Apple" that might mean gold-coloured iPhones for a jewellery-loving tribe.

India has come a long way from 1990 when I covered the entry of PepsiCo, which was obliged to buy tomatoes from Punjab farmers and earn foreign exchange in return for selling sugared water to Indians. "Sugared water" is incidentally what Apple founder Steve Jobs called cola when he wooed Pepsi's John Sculley to join his computer company to drive marketing in Apple's history-making epoch. 

While Gates came calling a few years later, I was not sure if Microsoft was focused on selling its then monopolistic Windows software to Indians or had something that would actually benefit India's economy by way of exports. Things have changed now. Microsoft has software development facilities in India that contribute significantly to its progress and that of India.

As for Apple, the real focus of policy-makers and serious-minded Indians is whether it can help India become a powerhouse as part of a so-called "China plus one" strategy to diversify its manufacturing. In fact, Apple is now said to produce about 7 per cent of its iPhones in India through partnerships with companies like Foxconn and Pegatron, up from only one per cent two years ago. Most of that is by way of assembling components.

Last financial year, Apple is reported to have exported $5 billion worth of iPhones from India (out of a total $7 billion in Indian revenues) up four times on the year. It is now expected to make 25 per cent of its iPhones in India over the next two years. Foxconn has been in the news for planning to invest $700 million to build a 100,000-job factory in southern Karnataka, which is only a small beginning in an anticipated manufacturing boost. 

That is indeed good news for those who want to see India as a stronger economy from a producer's point of view that creates jobs and wealth, and not just as a consumer market. 

Cook also said during his visit that it has a strong developer community in India to build software around its iOS platform and an estimated 1 million jobs have been created in India, thanks to Apple's app design centre in Bangalore launched in 2017. 

Does that make India significant enough in a manner that India gains from Apple as much if not more than Apple gains from Indian consumers? Perhaps, if Bollywood, Kollywood, and the other woods of Indian cinema turn iPhones into global content export engines the way Indian software companies turned personal computers into forex-earning ninjas to morph India's sagging economy. 

To be fair to Apple, it is also a quiet importer of software services from India. Among its vendors are Wipro, Infosys, Tata Consultancy Services, Tech Mahindra and a lesser-known company, Exilant (since acquired by Quest Global). These companies have been providing confidentially to Apple a range of services in application development, data warehousing, business intelligence, product lifecycle management, channel sales and customer care. 

No one talks about it, but things leak out of former or anonymous employees on sites such as salary tracker Glassdoor. One geek says of working on Apple projects: "Work was really great, you get a lot to learn in very short time. A lot of responsibilities and stringent timelines, definitely make you a good developer if you are willing to put in the effort...Real fun-loving team that will make you enjoy your office experience." 

On balance, I find Apple's engagement encouraging for India's economy but it is difficult to get all the required numbers. I would not jump to conclusions on how much Apple will help in making Prime Minister Narendra Modi's dreams of India becoming a global manufacturing hub. A lot depends on cost efficiency, infrastructure and tax incentives that Apple or its partners perceive. 

When it comes to the crunch, Apple is a hard-bargaining company that seeks value for money in its investments, which is what has made its cash and similar reserves swell to $51 billion and assets to cross $346 billion.

(Disclaimer: The views of the writer do not represent the views of WION or ZMCL. Nor does WION or ZMCL endorse the views of the writer.) 

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