Like the previous increase, the new raise on taxes for imported smartphones is a move by the Indian government to promote India's domestic manufacturing and get more companies to build products within the country. While Apple has set up an iPhone SE assembly in India, and is looking into doing the same for the iPhone 6s, this further increase is yet another setback for Apple's expansion in India.
India is raising custom duties on imported mobile phones to 20 percent from 15 percent, a bid to promote domestic manufacturing that may hurt Apple Inc.’s ability to compete in the world’s fastest-growing smartphone market.The raise is part of Prime Minister Narendra Modi's long-running Make in India program, aimed at getting foreign companies to build more manufacturing and assembly operations in India. At the time of the 15 percent tax on imported smartphones, the price of iPhone models rose by about 3.5 percent across the board (excluding the Bangalore-built iPhone SE). The most expensive model, a 256GB iPhone X, cost 105,720 rupees ($1,646), up from 102,000 rupees ($1,593).
The iPhone maker has been seeking to expand its presence in India and has negotiated with the government for lower tariffs on certain components. But the latest duties -- part of a budget unveiled Thursday -- show the country moving in the opposite direction.
As most of Apple's hardware becomes more expensive in India, users of the company's software in the country spoke about the poor performance of services like Apple Maps and Siri. One user in Bangalore, Mihir Sharma, told CNBC that "Apple Maps is a joke in India," and many users reported that Siri "often struggles" to make sense and correctly respond to Indian accents. Analyst Faisal Kawoosa said, "There is no denial that the Apple ecosystem isn't aligned much to the usage and value of Indian users," and until Apple can expand its footprint in India most customers believe it will stay that way.