Jan 10, 2017 01:08 AM EST By Pretty Abegail Pacilan, UniversityHerald Reporter

Later this month, Apple CEO Tim Cook is said to enter talks with the Indian government on the possibility of opening a local manufacturing plant in the country. Reports circulating that it is Apple's Taiwanese Original Equipment Manufacturer (OEM) Wistron that will be the one to build the manufacturing plant in Bengaluru and produce for Apple in India.

The initial reason for the plant is just to do assembly inside India's tariff barriers since Apple is currently carriying a 12.5 percent of import tax levied on each iPhone sold in the country. The company only holds a meager two percent share in the Indian smartphone market, and one of the prime reasons for this figure is the iPhone's expensive price due to a high import tax, Forbes reported.

Building the plant inside India would cut off the 12.5 percent tariff, as components from which to assemble electronics enter India tariff free. While it is true that India has cheaper labor than China, analysts believe that there will also be lower labor productivity as the two will always go together.  If Apple press on its plan, analysts could still not assert whether the absence of the tariff will cover the productivity differential.

Cook, however, believed that India is an important growth market in the company, even it lacks robust source of raw material locally compared to China. Sources added that India could sell to the company solder, capacitors, wires, which all of these the country can produce, however, having a foreign manufacturer buying locally is not the main value here but driving up the standards of that local production to meet international standard is the big catch for India's market.

It is worth noting that, after relaxing its regulations that required foreign tech companies to locally source at least 30 percent of products sold in retail stores, the Indian Government is determined that it would not give in to any more demands by Apple, or any other tech company that intends to sell its products in physical brand stores in India, Phone Arena reported.

If plans pushed through with Apple opening a manufacturing plant in India, it will be able to open direct retail stores in the country where it has very limited market share.

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