The company is seeking new markets to grow its iPhone business, and India is a key target

Apple has started assembling phones in India, completing a first trial run with the manufacture of its cheapest handset, the iPhone SE. This first step into the Indian market has been a long time coming, but Apple confirmed today to The Wall Street Journal that production has finally begun. The handsets are being assembled by Taiwanese contractor Wistron and will begin shipping to Indian customers some time this month.

It’s significant news for Apple, which is looking to establish itself in the India market as the growth of its iPhone business slows down. But to succeed in India, with its population of 1.3 billion, the company faces a number of challenges. It first needs to meet a requirement in Indian law that single-brand retailers source 30 percent of their components locally, and then it will need to bring the price of its devices down.

The average smartphone in India costs around $155, according to research firm IDC, while the iPhone SE starts at $399. India’s phone market is currently dominated by Chinese manufacturers which account for more than 50 percent of smartphone sales. Samsung is the single largest brand, controlling a little over a quarter of the market, while Apple’s market share is not much more than 2 percent.

Assembling iPhones in India will help Apple meet local-sourcing requirements. And the move should also endear the company to Prime Minister Narendra Modi, who has been pushing for more local manufacturing jobs under his “Make in India” initiative.

But bringing down the price of the iPhone will be a more challenging proposition. The WSJ reports that the iPhone SE is currently sold by India resellers for $320, but that government officials hope this price will drop by $100. Apple has traditionally been loath to reduce its profit margins on the iPhone though, and has compensated for slowing unit sales by making more money on each device. The company will have to think about whether the promise of the India market is worth a change in tactics.



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