The launch marks a victory for Apple, which has been trying for years to expand in India but was restricted by rules requiring foreign companies to source 30 per cent of components locally © AFP via Getty Images

Apple opened its first online store in India on Wednesday aiming to increase sales and manufacturing capacity in the country, as US companies work to diversify their supply chains outside of China.

The September 23 unveiling comes just in time for India’s Hindu festival season — the most lucrative time of the year for mobile phone companies — and as the government of Narendra Modi, prime minister, seeks to attract investment to kickstart a moribund economy.

The site greets Indian shoppers with “Namaste” and features the “made in India” iPhone SE and 11. 

The launch marks a victory for Apple, which has been trying for years to expand its presence in India, the world’s second-largest mobile phone market after China, but was restricted by rules requiring foreign companies to source 30 per cent of components locally.

India began relaxing regulations last year in an attempt to capitalise on the fallout from the growing US-China trade war, said Navkendar Singh, mobile device researcher at the International Data Corporation India, allowing foreign single-brand companies to sell directly to consumers.

Other policies have also worked in the Silicon Valley group’s favour, including New Delhi’s production-linked incentive scheme, announced in June to boost smartphone manufacturing. Apple manufacturers Foxconn, Wistron and Pegatron are among 22 companies that have applied to the scheme, said technology minister Ravi Shankar Prasad in August.

“The Indian government would love to develop the country as a manufacturing alternative to China,” said Mr Singh. “It’s a marquee brand for the Indian government initiative — when Apple starts making in India, it’s a symbol of pride and prestige.”

A gradual ramping-up of manufacturing capacity in India could pave the way for Apple to start exporting phones globally, but analysts warn it will take time for more sophisticated components such as chips to be made in the country.

Currently, Apple sells almost 40 per cent of its phones in India through partnerships with Amazon and Walmart-owned Flipkart, competing in the premium space against Samsung and One Plus. It holds a sliver of market share of about 1-2 per cent but enjoys immense cachet as a luxury brand.

The online Apple store attempts to give Indian consumers a premium experience, with special pricing for students and free photography and music workshops. Signature gift wrap and personalised engraving on devices are on offer for the holiday season.

“For Apple, the online store brings them a significant advantage to draw people into the ecosystem,” said Tarun Pathak, analyst at Counterpoint Research in Gurgaon.

“Tech companies want to be in countries that can provide scale to them, and India is one of those countries. It has not only domestic consumption but a huge opportunity for export,” said Mr Pathak.

But the immediate question is how companies will fare during festival season, which begins mid-October, lasts for more than a month and usually accounts for one-third of annual smartphone sales. Surging coronavirus cases in the country have ruled out a swift economic rebound and consumer spending in India is expected to contract by eight per cent in 2020, according to Fitch Ratings.

“This season will be crucial for a lot of the brands hit by Covid-19,” said Mr Pathak. “There will be an uptick in sales for sure, we just don’t know how big.”

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