Foxconn Factory may be Apple's Door into India

Apple efforts to open its own retail stores in India have failed so far, but that may change soon. The government is considering giving Apple a three-year exemption to the local sourcing requirement while establishing its in-country business and Foxconn builds a new factory.

Apple may get three-year local sourcing exemption in IndiaApple may get three-year local sourcing exemption in India

Sources speaking with the Times of India said negotiations to give Apple a two- or three-year exemption are already under way and are expected to work out in the company's favor. Apple is currently barred from opening its own retail stores in India because it isn't sourcing 30 percent from local vendors.

Apple currently sells its products through retail partners in India instead of through its own stores. The iPhone maker was hoping for a local sourcing exemption under a "cutting edge technology" clause, but that didn't pan out.

Some iPhone chargers are being sourced from India, and even exported out of the country, but that hasn't been enough to sway the government. What may, however, is Foxconn's plan to open a factory in the country—a factory that presumably will make iPhones.

Foxconn isn't in a position to make iPhones in India yet, but give it two or three years, and it probably will be. Unsurprisingly, that's exactly how much time India is looking at for Apple's temporary waiver. Assuming Foxconn's plans stay on track, it'll be ready to make iPhones locally just as Apple's exemption expires.

Even though it's a pain for Apple, India's strict business regulations make sense. The country is working to grow its economy, and forcing companies to source parts, materials, and products locally helps establish businesses and create jobs.

For Apple, this amounts to the cost of entry into what it sees as a growth market on par with China. Establishing its own retail stores now builds the foundation for that expected growth and revenue.

For India, this looks like a winning scenario all the way around. By giving Apple a short exemption, it gets a stronger presence from the company in the country, and it gets the jobs and economic boost that comes along with Foxconn's factory.