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Why are all Apple products so costly?

 

No Local Manufacturing & Retail

Apple does not have a local manufacturing unit in India. They gave contracts for assembly (not manufacturing) of its iPhone 7 and iPhone SE smartphones to Foxconn and Wistron. Since they are assembled here, these devices are relatively cheaper. Components and PCBAs (printed circuit board assemblies) for these phones are still imported.



Most iPhone flagships are imported and drive the cost up.

Also, as per the Indian Foreign Direct Investment policy, for a company to set up a manufacturing unit in the country, it has to source 30 percent of components locally, which is impossible for something like the iPhone.

Also, Apple sells its smartphones and other products in India via its vast third-party retail network. Though it has recently introduced its official online store for India, even that it is dependent on third-party vendors for distribution.

These vendors, distributors, transport agents, and other middlemen take a hefty cut.

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Taxes & Custom Duty

It was in April this year that Apple hiked the prices of its iPhone 11 series as the Indian government hiked the goods and services tax (GST) from 12 percent to 18 percent. This resulted in a hike of 5 percent in the prices of iPhones in India.

The government also increased the net import duty in the last Budget by 2 percent by withdrawing the exemption on social welfare surcharge which was earlier available on basic customs duty on mobile phones.

The government also increased the import duty on PCBA (printed circuit board assembly) from 10 percent to 20 percent and for chargers from 15 percent to 20 percent which is also carried forward on the retail price.

All these taxes levied on the iPhone have to be borne by its customers.

Brand Value & Currency

Apple today is a premium tech brand and owning an iPhone is a style statement. Apple does offer a unique ecosystem and security that few can breach, but for Indian buyers, even that seems not enough for what they pay.

Apple also keeps considerable profit margins for its smartphones, which many industry experts have said to be somewhere around 500 percent!

Currency depreciation is another major factor why the iPhone is expensive in India and relatively cheaper in countries like Japan and Dubai.

Get this, the starting variant of the iPhone 12 retails at $699 in the US which translates to Rs 51,287 (current exchange rate). The retail price of the iPhone 12 in India is Rs 69,900 which is Rs 18,620 more than the US price. That’s almost 37 percent more!

Despite the above caveats, people will keep buying and upgrading to Apple’s latest iPhone because it’s more than a smartphone; It’s a brand.

Will iPhones Ever Get Cheap in India?

One of the ways that Apple phones can get cheaper in India is if manufacturing starts locally, which as per reports could happen in the coming days as Apple has plans to shift major parts of its Chinese manufacturing units to India.

As per a Reuters report, there’s been a strong request from Apple to its clients to move part of the iPhone production out of China after the US-China trade war erupted.

Apple’s supplier Foxconn is reportedly set to invest 1 billion dollars in India to expand its factory and Wistron is also pushing for India expansion.

So yes, the iPhone could get cheaper for Indian customers in the future.


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