Navigating the Maze of iPhone Pricing in India

Despite Apple’s increased focus on India and its manufacturers setting up shop in the country to avail of the government’s PLI (Production-Linked Incentive) scheme, the latest iPhones are still more expensive in India than in most foreign markets. Apple fans around the world eagerly tuned in on September 12 for the launch of the iPhone 15 series, with the base models featuring upgraded cameras but powered by the same A16 Bionic chip as the previous generation. The real innovations were reserved for the premium iPhone 15 Pro and Pro Max, boasting Apple’s new A17 Pro chip, representing a significant performance leap.

However, for many Indian consumers, the enthusiasm surrounding these advanced models was dampened by their prohibitive prices. The base model of the iPhone 15 Pro was set at Rs 1,34,900, and the iPhone 15 Pro Max came with a staggering price tag of Rs 1,59,900, making India one of the most expensive markets to buy these flagship phones. In comparison, the base variant of the iPhone 15 Pro Max in the USA ranges between Rs 99,500-1,11,000.

To make matters more perplexing, the iPhone 15 and 15 Plus are being manufactured in India, where the “Make in India” initiative was expected to lead to more affordable pricing. Yet, the base models of these Indian-made phones are around 20% more expensive in India than in the USA.

Cracking the Apple Puzzle in India

The expectation of Indian consumers for Apple to lower iPhone prices in the country is grounded in several factors. Despite Apple’s global popularity, India remains a price-sensitive market, where Apple is not among the top five smartphone brands. As of the second quarter of 2023, research firm IDC reported that four out of the top five smartphone manufacturers in India were budget-friendly Chinese companies, including Vivo, Realme, Xiaomi, and Oppo.

However, Apple has been vocal about its intentions to expand its smartphone presence in India, even opening its first retail stores in Mumbai and Delhi. These moves signaled a greater emphasis on the Indian market, raising hopes that coveted iPhones would become more affordable.

One of the primary catalysts for change was anticipated to be the Indian government’s PLI scheme for smartphone manufacturing, initiated in October 2020. This scheme offers cashbacks to smartphone manufacturers for setting up production in India. Notably, Apple’s major contract manufacturers—Foxconn, Wistron, and Pegatron—embraced this opportunity, establishing factories and commencing iPhone manufacturing in India. Despite these benefits to manufacturers, India still ranks among the most expensive countries for new iPhones.

The Conundrum of Component Sourcing and Import Duty

The major contributing factor to iPhone pricing in India is the definition of “manufacturing.” The government’s goal was to encourage supply chains to set up shop in India, but this transition has been slower than expected. Consequently, many components used in Made-in-India iPhones are still sourced from overseas, incurring a 22% import duty.

Even with the three companies manufacturing iPhones in India, a substantial portion of the manufacturing capacity is dedicated to producing older iPhone models. This means Apple is likely still importing a significant number of its base variants, which are subject to import duty. Consequently, the company is unlikely to maintain different pricing tiers for the same phones based on their origin.

This is not an indictment of the PLI scheme; rather, it’s a recognition that supply chains take time to shift. As Foxconn, Wistron, and Pegatron continue to ramp up manufacturing capacity in India—presently accounting for only about 5-6% of iPhone manufacturing—pricing dynamics may change.

China’s smartphone manufacturing industry developed over several decades, while the PLI scheme in India has generated a significant number of jobs but hasn’t yet entirely reshaped the supply chain. Apple’s trio of Chinese manufacturers had created as many as 150,000 direct and indirect jobs in India by March.

Cracking the Pricing Enigma: Apple’s Indian Strategy

Yet, the nascent PLI schemes and import duty issues don’t fully account for the exorbitant pricing of the flagship iPhone 15 Pro and 15 Pro Max in India. These phones retail in India for approximately 50-60% more than their prices in the USA.

The stark price differential can be attributed to the limited market size for ultra-premium smartphones in India. Apple recognizes that only India’s wealthiest consumers are likely to invest in these premium devices, considering them as status symbols. A moderate price reduction may not significantly affect their purchasing decisions. Conversely, the high price tag can enhance the perception of the iPhone as an exclusive status symbol, encouraging purchases.

Apple’s focus in India has shifted towards bringing the middle class into the iPhone ecosystem, primarily through the aggressive marketing of older iPhone models, which offer more affordability. This approach has been yielding positive results, with Apple experiencing substantial growth in sales, even as the overall smartphone market in India remained stagnant

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