Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Apple's facing quite the conundrum. 

On the one hand, it wants to sell phones in India, the world's second-largest mobile market and a region that's increasingly crucial to the company's growth. On the other, those phones are priced way outside the budget of most consumers.

To address the problem, Apple wanted to import and sell refurbished phones, becoming the first company in India to do so. The idea was brilliant because it would have given Indian consumers access to more moderately priced iPhones, avoided the damage to Apple's premium position that a low-cost model would have caused, and helped weave its iOS into the habits of a nascent market that's yet to cement its loyalty to the rival Android system.

Rising Share
The Asia-Pacific region is becoming increasingly crucial to Apple's growth
Source: Bloomberg

But the Indians are having none of it. Bloomberg News reports that Apple's second attempt in two years to get the required permission is facing continued resistance from local groups.

The reason seems simple: India doesn't want to become the recipient for the world's gadget hand-me-downs. In reality, self-interest may have more to do with it. The backlash is being led by entrenched local phone manufacturers that benefit from Apple pricing itself out of the market.

Wrapped in a veneer of patriotism, Indian parochialism has already tripped up other Western companies seeking to implement well-meaning, but misguided plans. Facebook's bid to introduce its free, scaled-down mobile Internet service -- warmly welcomed from Asia to Africa -- was beaten down by local opposition. 

India isn't alone in knocking back Apple's attempts to import used devices. In fact, many electronics companies ban their recycling partners from exporting e-waste across regions as part of a global effort to stop developing countries from becoming the trash bin for richer nations' discarded devices.

“Make in India could turn into Dump in India,” Sudhir Hasija, chairman of phonemaker Karbonn Mobiles told Bloomberg News' Saritha Rai.

To be fair, Apple's plan for India isn't about dumping waste. Guidelines under the Basel Convention specify the difference between waste and reuse, with clear and strict documentation required for each individual device. Apple's existing rigorous processes should ensure that its plan meets these requirements.  

Still, as Facebook founder Mark Zuckerberg discovered, arguments aren't won on reality but on perception, and one can't argue with the potential of a billion mobile consumers.

India's Boom
The number of mobile phone subscribers lags only China
Source: Bloomberg data, ITU

For Apple, the way out can be found 15,000 kilometers from India. Five years ago, Foxconn Technology Group -- at the behest of Apple -- started churning out iPhones in Brazil. Lacking the labor, the infrastructure and the supply-chain cluster, Brazil was, and still is, a terrible place to set up. Yet, thanks to local tariffs and pressure, the Taiwanese assembler had no choice.

While Brazilians dreamed of massive Shenzhen-scale factories employing hundreds of thousands of workers, Foxconn found a workaround. Instead of gathering the dozens of different components and compiling them in-country, Foxconn simply shipped almost-completed devices, akin to Lego kits, and had a far smaller workforce slot them together. Proudly bearing the label "Made in Brazil," these iPhones were still mostly Chinese.

Until recently, Apple took a ``shred everything" approach to recycling iPhones. Devices were torn apart with components crushed or melted down to their raw materials. Now the company has Liam, a robot that Apple claims can disassemble 1.2 million iPhones annually and separate them into parts.

According to IHS, 98 percent of an iPhone's costs are in the components. Assembly itself costs less than $5. If Apple, with Liam's help, can disassemble old iPhones into their constituent pieces and have them rebuilt in India to Apple's strict standards, then the company can appease Prime Minister Narendra Modi's Make in India policy. Such a move would also help it avoid tariffs on imported phones, which were recently doubled, and save on the cost of manufacturing components.

Just how much disassembly would be necessary to avoid India's import ban is open for discussion, yet it seems reasonable that near-complete models would meet the definition of components rather than ``used phones."

By offering a ``Make in India" iPhone at a price locals can afford, Apple CEO Tim Cook can appeal to the country's nationalistic sentiments and succeed where Zuckerberg failed.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. These figures are based on the cost of an iPhone 6s Plus, yet the metrics largely hold true for other models.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net