Apple wants to be able to open its own stores in India.
India's government wants Apple to make iPhones locally.
And so the horse-trading begins.
To open single-brand stores, foreign companies must buy
30 percent of their components in-country. Round one of the Apple-India tussle
ended with victory for the visitor when officials announced a three-year grace
period on that stipulation back in June.
Now round two is underway, with Apple seeking tax
concessions, including lower import and manufacturing duties, Shruti Srivastava
of Bloomberg News wrote last week. India doesn't look eager to give more
ground because of the precedent it would set, Srivastava wrote Tuesday.
That puts the ball back in Apple's court, with the
world's largest company able to trade its three major assemblers - Foxconn
Technology Group, Pegatron and Wistron - off against each other. Whichever of
the Taiwan trio is most eager and able to take one for the team in India would
secure itself huge brownie points in Cupertino.
And the winner might be
Wistron
According to the Times of India, Wistron looks set to be
that company and will fly the Apple flag when it starts "Make in
India" iPhone assembly in April. With most of the supply chain still in
China, and manufacturers facing dozens of challenges to operate in India, my
sense is that Wistron would employ what I call the Brazil Solution.
Instead of a fully-fledged soup-to-nuts manufacturing
operation, Foxconn (aka Hon Hai Precision Industry Company) helped Apple get
around Brazil's import tariffs by shipping partially assembled iPhones to the
South American nation for local workers to slot together like Lego.
Assuming the Times of India report is correct, it's
possible that Apple agreed to pay for some or all of the equipment to be
installed by Wistron, a strategy the California company has deployed on and off
for more than a decade. In return, such facilities cannot be used to make
products for competitors. Given the iPhone's annual cycle, this could result in
a lot of idle time for Wistron in a country where laying off workers is
extremely difficult.
Read also: Apple named biggest tax avoider in US
As the smallest of the three iPhone assemblers, Wistron
can least afford the cost of setting up a dedicated Apple plant in India
because electronics manufacturing is all about economies of scale (I doubt
Foxconn's Brazil operation made much money). Yet it's also got a lot to gain by
being the most eager to take on the task. The terms of the contract between
Apple and Wistron - and what was offered to other partners - will be one of the
industry's best-guarded secrets.
Whatever the deal, such a move is just the kind of
concession from Apple that Indian officials need to take back to their
constituents so they can give ground elsewhere, including on tax breaks and
product-labelling requirements.
After years of doing business in China, Tim Cook has
learned a lot about giving and saving face. Now it looks like he's deploying
those lessons in India.
This column does
not necessarily reflect the opinion of Bloomberg LP and its owners.
BLOOMBERG