India's newest iPhone prices hurt the people selling them, buying them and even taxing them

Rachel Varghese (0:01)

What would you do if you had 3 lakhs to spare? Would you buy a small yet dependable entry level car like an Alto? Or maybe even a Royal Enfield? Or maybe it's time for a really nice vacation to Thailand? Or maybe you should be practical and just invest in stocks or gold?

Or would you spend all of it on a single phone?

That's the question several Indians have been asking each other all over social media ever since Apple launched its latest models last week. The real scene stealer in the new line up was the company's first foldable phone, the iPhone Duo. And its starting price in India? Rs 2,99,900.

Cue memes with a kidney listed as a checkout payment option. And I even saw an Instagram post about how the phone is called Duo because that's how many kidneys you would need to sell to actually get your hands on it. And it's not just about the Duo. Even the other two models released alongside it, the iPhone 18 Pro and Pro Max, also start at quite a steep price tag of almost Rs 1,65,000 and Rs 1,80,000.

But the thing that's actually catching everyone's attention is the fact that for what feels like the first time, Apple isn't discounting its older models to mark this new launch. That's usually what the company's move is, so that it can clear its inventory and give users a chance to upgrade or enter the ecosystem more affordably. But this time, Apple is increasing prices across its lineup instead. Now, Apple has been signaling this increase for months now. The reasoning is that there's a memory shortage that has hit every phone maker this year as chip makers redirect their resources towards the increasing AI demand. Phone prices have been increasing across brands and around the world. Still, a Reuters report pointed out that Apple's India price hike has been one of the steepest globally speaking. While the US, for example, saw an increase of 10-21%, India, on the other hand, saw an increase of 20-41%.

And it's not just about what consumers are willing to pay. The underlying memory shortage squeeze has already caused store footfalls to reduce for retailers. Plus, early market research from IDC India and counterpoint research suggests that unit sales for Apple may fall for the first time ever in India. But this goes beyond Apple. Mobile sales in general in India had dropped by 9% in the first couple months of this year, which is why the Indian Retailer Association has been petitioning the government since last year to ease taxation on phones because store footfalls have been falling significantly as prices increase and consumers have been putting off upgrading their phones or have been choosing secondhand models. More recently, the association has also explicitly pointed out that the current tax structure is causing the government to lose hundreds of crores because of the increase in grey market sales of phones. But, if the memory shortage is a global phenomenon and prices are increasing across brands and all over the world, why was Apple's India hike one of the biggest and what happens when cheaper alternatives eventually run out?

Welcome to Daybreak, a business podcast from The Ken. I'm your host, Rachel Varghese and every day of the week, my co-host, Snigdha Sharma and I will bring you one new story that is worth understanding and worth your time. Today is Thursday, the 17th of September.

Everyone has been talking about Ram Bookalips. And how could they not? When prices for storage trips have almost quadrupled since September last year. As a result, phone makers everywhere Many manufacturers. and manufacturers have had to increase their prices to accommodate increased manufacturing costs. In India, counterpoints research shows that prices have increased by more than 20 percent. On top of that, The Ken's own reporting shows that many makers are even compromising on manufacturing costs by cutting corners elsewhere in the phone's make. A Chroma salesperson told my colleague, Sakshi Sadashiv, in July, that phones are becoming heavier, peak brightness is coming down, selfie cameras are losing resolution, and cheaper camera sensors are replacing better ones despite carrying the same megapixel count. And that isn't even all of it. Two other salespeople from Reliance Digital this time, told Sakshi that even things like water resistance has been weakening. Studio speakers are being replaced by mono audio, charging speeds are slowing down, and premium finishing touches like stronger display protection and in-box accessories are all being phased out as well. Now, like I said earlier, this is happening globally. Apple's own price hikes across its lineup reflect that. The iPhone 16, which is a two-year-old model, which has seen no updates in specs whatsoever, saw its price increase in India last week by 20,000 rupees. That's almost a 30 percent increase from its price before. In the US, meanwhile, the same phone saw an increase of a hundred dollars, which is about 14 percent of its price before. In fact, the Duo's price in the US is roughly a lakh cheaper than it is in India. And by the way, it's not just Apple. The US has seen an overall price increase of only 5 percent in smartphones this year, and China 10 percent. The average global rate of increase is 15 percent, which is a lot lower than India's 20 percent plus. So why the difference? Well, part of the reason is India's unique stacked tax structure, along with the falling rupee. You see, despite the fact that Apple has tie-ups with manufacturers in India, like Tata and Foxconn, Duo itself was not assembled here. This is usually the case for new models that have new technology, likely because the tech is proprietary, and so the company is more likely to trust and train workers at a local factory before international ones. So Duo was specifically hit by India's Stacked Taxes. Here's what that means. About 15 percent of a basic customs duty is levied on the phone because it's being imported into the country. Then on top of that, an 18 percent GST is calculated on the new value after the duty, not the original price. Even the iPhone 18 Pro and Pro Max, despite being assembled in India, were affected by these taxes, making them roughly 46,000 to 51,000 rupees more expensive here than in the US. Now, you might be wondering why that's the case, because if the phones are resembled here, then that means there shouldn't be any customs duty on them, right? But the price is still much higher, and that's because some of the phone's key components are imported and the same tax structure I explained earlier applies to them, though it's not always as high as 15 percent customs. So why hasn't the government cut these taxes or given companies some kind of tax holiday, especially after having quoted Apple's manufacturing investment in India for years? The thing is, it has, but only on the components, not on the finished devices themselves. Duties were first cut in 2024 and then again in 2025 and 2026 on specific components like circuit boards, camera parts, and cables, bringing down their duty costs to almost zero. But analysts have noted previously that those cuts would likely only impact 3-4% of the build of materials cost, and that they were not enough to offset the cost increase for other components. That's why the ICEA, or the Indian Cellular and Electronics Association, has been pushing for tax cuts on the finished devices themselves. In fact, the body, which represents Apple, Foxconn, Vivo, OPPO, Xiaomi, and other industry players, wrote to Nirmala Sitharaman just this month, asking for the tax to be reduced from 18 to 5%.