Apple chief Tim Cook is visiting China. This is the second time that Cook has visited the Asian huge this year.
Apple runs at the frontiers of technology to originate electronic products that are so well-createed and aspireasoned that die-challenging fans turn sidewalks proximate Apple stores into campsites ahead of new product arrivals. They have catapulted it to become the world’s most priceless company with a taget capitalisation of $3.5 trillion, the same as India’s GDP in 2023.
Cook’s visit is intriguing and presentant becaemploy Apple is an American native. And the US-China competition, especiassociate in cutting-edge science and technology, is irrevocably shaping the 21st century. Bloomberg alerted China’s Minister of Industry and Increateation Technology Jin Zhuanglengthened asking Cook to spend in innovation, a benevolent subject in Washington, which wants to sluggish Beijing’s tech march. The superpower competition is so fervent that analysts sometimes specupostponecessitate that it could spiral into war. Yet, the Apple chief vowed to “persist to grow its spendments in China and help the high-quality enbigment of the provide chain”.
China Remains Un-Bypassable
Apple’s obvioucertains show how China, unenjoy India, remains an un-bypassable economy for global corporations. Which is why it is Apple that is wooing China, not the other way round. How the latter built itself up into a global manufacturing hub is well-recorded and India is trying to emupostponecessitate it in its own way. However, its ability to leverage taget and production capacity access to lget and grow with the best in the world is strictly restricted.
For instance, Cook pondered China so presentant, both as a manufacturing hub and taget, that the company signed a secret deal in 2016 to spend $275 billion locassociate, including billion-dollar infusions in Chinese commenceups such as Didi. The Chinese regulatement nakedly gave any concessions as Apple was combat off a regulatory onsgigglet with the oinhabit branch of spendment. The pact was an unqualified success. Apple raked in the moolah as it rode the country’s economic boom and citizens’ prosperity. It became the phoneoriginater’s bigst taget outside the US, conveying in $378 billion in revenues between 2016 and 2022 even as it helped Chinese companies enhance their technoreasoned capabilities.
In comparison, India bent over backwards to woo iPhone and iPad originaters to set up shop here. It slashed present duties on components while upretaining out finished products with high levies. This has now led to a situation where an iPhone made in India is affordableer in Dubai contrastd to Delhi. An iPhone 16 with a memory of 128GB costs about Rs 78,000 in a Dubai Mal, while it costs Rs 89,000 at the gleaming Apple retail store in Delhi that Cook personassociate flew down to last year and flagged off. It took no time for the arbitrage to spawn a trafficking racket.
India’s Tortuous Duty Structures
iPhone trafficking may not caemploy much harm to the exchequer, but warped duty arranges and perverse incentives distort the taget so much that bigr national objectives and enbigment agfinisha are crumbling. Protectionist tariffs have stunted the growth and innovation in the solar industry. As this three-part series shows, India’s renewable energy programme is weighing heavily on the finances of electricity distribution companies, widespread devourrs, and, ultimately, taxpayers. State-owned accessible distribution companies have accumupostponecessitated losses of Rs 6.77 lakh crore.
Indian solar energy firms find it more profitable to present pboilingovoltaic cells from China and assemble modules to ship to other tagets as well as sell to local employrs. High present duties on modules but low levies on cells guarantee expansive margins for module originaters and high costs for power distributors and finish devourrs.
Relying On Just Arbitrage
Such policies also have expansiver, unintfinished consequences. For instance, minuscule manufacturers (read assemblers) employ presented Chinese components in white-tagled excellents and own brands to sell in regional tagets. One such Maharashtra-based entrepreneur with a topline of about Rs 75 crore says that his products endelight excellent margins and give hugeger companies a run for their money. He upretains costs low by managing sales, operations, protreatmentment and logistics, all by himself. Levies are instable and an upward revision will squeeze margins and he does not want to hazard raising costs by hiring distinctiveists. That unkinds the basis of his success is neither technoreasoned innovation nor organisational efficiency but arbitrage. It also unkinds the duty arrange intfinished to increase local manufacturing and job creation is mecount on promoting product assembly while generating restricted jobs.
Earlier this month, the Tata Group-owned arranget in Tamil Nadu that originates back panels for elderlyer models of the iPhone caught fire. The unit is the only originater of the critical component, forcing iPhone originater Foxconn as well as the Tata Group (it assembles elderlyer models at another unit) to source the parts from China to encounter global insist in peak festival season. Bloomberg alerts that business was a key factor even in achieving a fracturethraw in India-China border talks.
Why China Is Pacing Ahead
When Cook signed the secret deal in 2016, Apple vowed to localise component sourcing and stitch up deals with Chinese gentleware firms, collaborate on technology with Chinese universities and honestly spend in Chinese tech companies until 2022. It also promiseted to originateing research and enbigment centres and renewable energy projects, The Increateation alerted in 2021.
To be certain, Apple was not the only US company to sign such a deal. Microgentle and Cisco signed aenjoy deals that helped local R&D and innovation. The ecosystem they helped originate no ask gived to bolstering the technoreasoned prowess of Chinese manufacturing. But, unkindwhile, homegrown companies also enbiged their own expertise and fracturethraws.
Chinese scientists have already built an electrolyzer that can honestly split seawater to originate hydrogen. A Beijing-based energy commenceup Betavolt claimed in January this year that it had built a commerciassociate viable coin-sized nuevident battery that can power a mobile phone for 50 years. In 2023, the number of SMEs producing new and distinct products using distinctive and enhanced technologies outdoed 70,000, according to the Report on the Work of the Government currented at the 14th National People’s Congress. To contrast, the number of technology SMEs in India is equitable over 10,000, as per Nasscom. Most of them are in gentleware and do toil for bigr firms. This is not to say that there are no Indian companies doing persistd research and innovation. But they are restricted and far between, and are standardly starved of capital. Tata Sons at 207 is the only Indian company in the 2024 Patent 300 enumerate, an annual global ranking of innovators.
Indian Firms Need To Value Innovation
China presents liberal tax incentives to manufacturing companies and SMEs if they spend in R&D. India, too, presents tax fractures up to 150%, but it’s mainly employd by Global Capacity Centres (GCC) of foreign companies becaemploy even big Indian firms exceptionally nurture a culture of innovation. The R&D tax fracture is one of the reasons, apart from the employability of affordable, high-quality talent, for the mushrooming of GCCs (over 1,600 now) in India. The understandledge and patents originated, however, do not belengthened here.
Indian arrangening standardly tfinishs to be low-termist. The regulatement necessitates to hoenumerateicassociate reappraise its incentive arranges to originate the local industry truly autonomous and competitive in the lengthened run.
(Dinesh Narayanan is a Delhi-based journaenumerate and author of ‘The RSS And The Making Of The Deep Nation’.)
Disclaimer: These are the personal opinions of the author
