By Rishika Mittal

How can US-China Trade War solve the problem for the iPhone in India?

Apple has been extremely successful in China — the country has more than 40 Apple stores, and is Apple’s third-largest market worldwide. The company’s sales in China touched almost $52 billion in the recent most fiscal year. However, the Chinese economy began to a slowdown in the second half of 2018. This happened because of the Trade War going on between the US and China.

In order to make “America great again”, President Donald Trump, imposed tariffs of 25% on Chinese imports worth $50 billion and a 10% tariff on Chinese imports worth $200 billion. The idea is to make Chinese imports into the US expensive. As Chinese imports get expensive, the hope is that products made in the US will become more competitive, likely leading people to buy them more than they do at present, which would, in turn, benefit US businesses. However, it didn’t turn out to be as expected.  Between January and October 2018, the US ran a trade deficit of $344.5 billion with China. This means the US had imported goods worth $344.5 billion more from China than it had exported to that country. In return, US businesses in China saw a rapid decline, like iPhones.  Weak demand in China, followed by supply constraints of new products and slowing iPhone demand in many markets resulted in a downfall of Apple’s revenue from China. This situation can be seen as a win-win situation for both India and Apple. India is the second largest smartphone market in the world. Due to the constraints put by China on American products, Apple can shift its production from China to India, making India the production hub for Apple other than the US and Brazil. This would help Apple in meeting the foreign investment requirement of India, which would lead to low or nil operational costs for the company, as they would no more have to operate through private retail shops. Hence, bringing down the hiked price of Apple products in India, and thus expanding the customer base in the country. This shift will also benefit India as it would lead to an increase in the Foreign Direct Investment in the country. Also, it will help in curbing the problem of unemployment and brain drain in India, as the unemployed will get new employment opportunities and the highly educated and skilled workforce will not have to migrate to other countries to search for better opportunities, all of them would be provided in the country itself.

Conclusion

Apple, one of the silver lining of the premium smartphone market in India, struggles to compete with the other brands in the market. The struggle is basically based upon striking a balance between the price and the customer base in the country, which can be curbed by increasing production of Apple products in India. Other issues of the ecosystem, such as different choices, expandable memory, Maps, and Siri, have to be dealt with by incorporating the diversity in the products that India possesses since ages. Otherwise, India is a market that has seen many brands flourishing from nothing to number one, and many brands being dug in a grave. Apple might be a brand of either of the two sides.

Rishika Mittal is a student of B.A. (Hons.) Economics in O.P. Jindal Global University.

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9. Image Source: cultofmac