Friday, May 27, 2016

It will not be an Apple a day in India for the present.

CEO of Apple, the maker of iPhones and iPads, Tim Cook was in India a week back to get permission to set up Apple stores, like in other countries. He attended temples and cricket matches, to try to understand Indians, but his visit was not fruitful. The government did not budge from its demand of sourcing 30% of parts locally, to create jobs, and did not give permission to sell refurbished second-hand phones. India desperately needs to create jobs, at the rate of over 1 million per month, so lots of Apples stores, employing a few retail staff in each, is of no use. But manufacturing for Apple is not easy. Foxconn operates at a margin of 1.5% so working conditions are very bad. It had to install netting to prevent workers from jumping to death at its factory in China. Such conditions will not be permitted in India. It set up a factory in Tamil Nadu but had to shut it down due to problems with unions, affecting 22,000 workers. Foxconn has a habit of lying and not delivering what it promises on paper. But even with such low wages and harsh working conditions Foxconn finds it more profitable to replace 60,000 workers with robots in China. India will not be easy for Apple. Its phones are more expensive here than in the US and it has no intention of competing at the lower end of the market. Why would anyone buy a refurbished phone when for the same price she can buy a new phone made locally or from China. Apple apps do not work that well in India and its voice recognition software, Siri, has problems understanding the Indian accent. Apple's revenue was just $1 billion in India in 2015, which is a mere drop in its total revenue of $233 billion in the same year. In 2015 the Apple app store in China generated revenues of $3.4 billion and may cross $4.5 billion this year. So was Tim Cook's visit during the punishing heat of summer a complete waste? We do not know what is on his mind but it is possible that he is worried about prospects in China. China's economy maybe considerably worse than what people think. There is a lot of speculation about what is going on inside China with rumors about a plot to oust the Prime Minister, Li Keqiang. Credit rating of Chinese firms are being downgraded at record rate. Also the government may suddenly change rules. In April the government blocked access to iBooks and iTunes music stores. When the iPhone 6 was launched it was unavailable and the Party mouthpiece, the Global Times opined that " whomever has an iPhone 6 deserves to be looked upon with despise ". Maybe that is how the Chinese forced Apple to invest $1billion in Didi Chixing, a taxi hailing company. Perhaps, Apple needs to change from its business model and look for new avenues. We hope India can be a partner in its new ventures.

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