This should calm Apple Inc’s jangled nerves. Less than a day after the iPhone maker reported a 26% erosion in its China sales, a top Indian bureaucrat said the country had waived a painful condition to pave the way for Apple to open its own retail stores.
The decline in China caused the first ever decline in iPhone’s sales and Apple’s first revenue drop in 13 years. Announcing the results in the wee hours of Tuesday, India time, CEO Tim Cook said India presents a “really great opportunity” for Apple. “I view India as where China was maybe seven to 10 years ago from that point of view, and I think there’s a really great opportunity there.” He however added that the slow networks and informal retail structure in the country is preventing the tech giant from realising its full potential in the country.
The networks will take time to speed up, but the one of the pain points in retail seems to have been addressed. The top official said the government had exempted Apple from having to source 30% of its goods from within India. It can open its own retail stores in the country without doing that.
The sourcing norm had been a hurdle for Apple, since the market does not have enough vendors to help it meet the norm. Apple currently sells in India through distributors, such as, Redington, Ingram Micro, Bettel and Rashi Peripherals.
The company does not officially report India sales separately, but according to reports, revenues from the country stood at $1 billion (around `6,600 crore) in 2015.
According to foreign direct investment (FDI) rules, the government can relax mandatory local sourcing norms for companies, which undertake single-brand retailing of products and have state-of-the-art and cutting edge technology, and where local sourcing is not possible.
“A committee headed by Department of Industrial Policy and Promotion (DIPP) secretary Ramesh Abhishek has allowed Apple to be exempted from sourcing norms, after the company made a detailed presentation, where it made a case for the use of the special provision of ‘cutting edge technology’ used in its products. The proposal has gone to the finance ministry for a formal approval,” the official added.
The company had given the presentation to the DIPP committee on April 19.
At present, 100% FDI is permitted in single-brand retail, but companies are required to take the approval of the Foreign Investment and Promotion Board (FIPB) if the limit exceeds 49%.
Apple has its own retail stores in China, Germany, the US, the UK and France.
Chinese smartphone makers Xiaomi and Le Eco have also submitted applications to open stores in the country seeking exemption from sourcing norms. “Their cases are yet to be taken up by the committee,” sources added.