MUMBAI/NEW DELHI -- Apple is set to use India as an export hub, having begun production of its iPhone XR model with the potential for outbound shipments.
The California-based tech company began assembling the year-old XR phones in India last month through contract manufacturer Foxconn, company sources confirmed.
This extends Apple's assembly line in India to midrange phones, upgrading from older entry-level models such as the iPhone SE and 6s.
"It's a very proud moment for India," said Ravi Shankar Prasad, India's information technology minister, as Apple phones labeled as being "designed in California" and "assembled in China" now will carry the message "assembled in India."
"All the Apple products, mobile phones being manufactured in India will be used for the domestic market, and will also be used for exports," Prasad added, saying he had received one of the devices.
The announcement comes as Prime Minister Narendra Modi's government promotes manufacturing in Asia's third-largest economy, seeking to create jobs and import technology.
Apple did not respond to a request for comment, but a company source did not deny the possibility of exports.
"It is too early to say if XR phones will be exported or not. But it is at Foxconn and Wistron's discretion if they want to export their products to their other units," said the source, who added that India is regarded as an important country in Apple's supply chain.
Taiwan-based Wistron assembles older iPhones at two sites in India, while the Indian units of Singapore's Flex and Finland's Salcomp provide chargers. China's Yuto Packaging Technology now also packages the iPhone SE and 6s in India, documents seen by the Nikkei Asian Review show.
Salcomp also has reached an agreement to take over a long-defunct Nokia handset facility near the southern Indian city of Chennai, the minister said.
"Something which was closed for close to 10 years is now going to start from March 2020," Prasad said. "I can tell you, apart from chargers and other equipment, it will lead to a diversified product portfolio of die-cut, stamping, molding, painting, etc."
The factory, in which Salcomp will invest 20 billion rupees ($280 million) over the next five years, will create 10,000 direct and 50,000 indirect jobs, he said.
Reports indicate Apple also looks to open its first store in India, especially after Modi's government relaxed foreign direct investment rules for single-brand retail stores. The American company had lobbied hard for the removal of a 30% local sourcing requirement.
This plan for a store indicates that Apple now is focusing as much on sales as on manufacturing after struggling to crack the Indian market, where the company still struggles to expand.
According to Counterpoint Research, Apple share in the overall smartphone market in India was at 1.1% in the third quarter of 2019, but in the premium segment (over 30,000 rupees), it was 30%.
Tarun Pathak, an associate director with Counterpoint Technology Market Research, reckons that the aspirational value for iPhones remains high but that affordability limits Apple's growth in India. Localizing assembly in India means Apple can escape a 20% duty.
"We have seen it with iPhone XR: A reduction in price made it the best-selling model for Apple in India during Q2 2019 -- a feat which no other new model ever achieved in India," Pathak said. "Apple seems to have applied that learning to iPhone 11 pricing, and initial uptake has been very strong."
Pathak said "made-in-India" iPhones have reached some European markets, but he was unsure of the volumes.