CCould Apple’s belated focus on India as a market and manufacturing base become as significant an event as Suzuki’s (Maruti) entry into the Indian car market exactly 40 years ago? The answer should be “yes” and “no”, although the differences in the two cases outweigh the similarities.
Suzuki entered a small car market in which older models had poor product standards, and hoped to expand the market dramatically with low-cost entry. Apple is entering a market that is already one of the largest for mobile phones, and unlike Suzuki, is focused on the top end of the market – which is why its market share in units, at around 5 percent, is 18. Converts to percentage. share of value (second only to Samsung’s 22 percent).
Suzuki entered into a partnership with the government, and enjoyed special benefits and protection from competition for an extended period, while benefits granted to Apple and its suppliers are also available to competitors. Suzuki introduced contemporary cars to Indians (around the same time as Japanese companies entering the motorcycle and commercial vehicle markets), and has enjoyed dominance in the small car market ever since. Apple is entering a bitterly competitive market that is already used to having the best as well as the cheapest products.
Importantly, Suzuki brought with it several Japanese vendors to set up shop in India and become suppliers for its Maruti cars. The result is India’s internationally competitive auto component industry. Since a car factory is largely an assembly unit, it is the vendor ecosystem built by Suzuki that has proved crucial. Part of that ecosystem is the steel industry itself, which had to start making special grades such as deep-drawing steel.
If India can show that Apple is indeed a good base for large-scale manufacturing of phone components and sub-assemblies, it could play the role of a catalyst. But the two policy crutches (production-linked incentives and tariff protection, which the WTO just rejected) have to go at some point. Will India’s booming mobile phone exports remain viable today?
The other important thing is that other car manufacturers around the world were watching. As India’s car market expanded, they eventually followed in Suzuki’s footsteps – with varying results. For good measure, some domestic enterprises also became important players in the passenger vehicle market, as did three others in the motorcycle segment. Will the same happen in mobile phones?
Read also: The cost of tackling climate change and how countries’ GDP metrics may fail to accurately reflect it
SSamsung initially did not find India friendly enough and focused on Vietnam, but it has a production center near Delhi. The question is whether it can be persuaded to expand that production base, especially since it has a large presence in the TV set and consumer durables markets.
The full scale of Apple’s success in India will depend on it becoming more than just a phone company, and extending Samsung-style consumer appeal to its full product profile, so that it can also sell millions of laptops, tablets, tablets. And watches – which could then be assembled/manufactured in India as well. Could Tata (for example) then become an Indian Foxconn, or even better, a Wistron? Or has India acquired a new reputation for flexible labor policies and efficient manufacturing? The short answer is that it’s still early days.
The two are in order of merit. Firstly, when a car and its parts are made in India, the country occupies a large part of the value chain. This is very different from mobile phones, for which the production cost is a small fraction of the retail price; The bulk of the Apple value chain remains in the US.
And second, although Apple’s CEO has talked about doubling and tripling its Indian workforce from the current 100,000, it’s hard to see electronics manufacturing/assembly as employment at this stage—and with it the automobile industry. Value-creation comprehensive back and forth relationship. Still, it’s enough for the time being that the promising start of electronics assembly and export could be the start of something huge.
By special arrangement with Business Standard