Apple’s India retail store plan hits local sourcing hurdle

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New Delhi: India’s Foreign Investment Promotion Board (FIPB) has ruled Apple Inc. must comply with local sourcing rules to sell products through its own retail stores, according to people with direct knowledge of matter, a setback to the iPhone maker’s plans to open retail outlets in the country.

The FIPB has cleared Apple’s application to open retail stores if it complies with rules to procure 30% of its product components locally, the people said, asking not to be identified as the decision isn’t public.

The Cupertino, California-based company manufactures most of its products in China now and doesn’t meet that criteria. India can provide waivers for the local sourcing rules to cutting-edge technology companies, but the panel decided it can’t certify Apple for that exception, the people said.

Chief executive officer Tim Cook made his first trip to the world’s second-most populous nation this month as his company looks to capitalize on the market’s growth prospects.

India is projected to have a billion new smartphones sold in the next five years, as consumers increase their incomes and adopt new technologies. Apple trails Samsung Electronics Co. and Micromax Informatics Ltd. in India market share now, in part because its products are relatively expensive.

The FIPB decision needs to be ratified by finance minister Arun Jaitley, the people said. Finance ministry spokesman D.S. Malik couldn’t immediately be reached for comment.

Apple’s India spokesman said he had no comment to offer.