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Foxconn just weeks from trial run to make newest  iPhones in India

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An iPhone X (right). As Apple's market share declines in China and the US-China trade war heats up, the US company needs to diversify into India.

Bangalore

FOXCONN Technology Group is within weeks of starting trial production of the latest iPhones in India as Apple Inc seeks to revive its fortunes in the country, people familiar with the matter said.

The trial run of the iPhone X range of devices would come before Foxconn starts full-scale assembly at its factory outside the southern city of Chennai, the people said, asking not to be identified as the plans are private. Wistron Corp already produces older models, such as the iPhone 6s, iPhone SE and iPhone 7, at a plant in Bangalore.

Apple has become a minor player in India with about 1 per cent of the country's shipments as its higher prices deter customers in the world's fastest growing major market. Production in India would help the Cupertino, California-based company avoid import duties of 20 per cent and also meet the 30 per cent local sourcing rule that would allow it to open its own stores in the country.

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"Seen from Cupertino, the India market looks minuscule, so Apple's strategy has been myopic," said Neil Shah, research director at Counterpoint Research. "They haven't capitalised on the ground potential - India will cross half-billion smartphone users this year." As Apple's market share declines in China and the US-China trade war heats up, the US company needs to diversify into India. "Apple no longer wants to keep all its eggs in one basket," said Mr Shah.

Indians bought more than 140 million smartphones last year, with just 1.7 million sold by Apple, as consumers favoured cheaper models from China. On Xiaomi Corp's Indian website, the Redmi Note 7 has a price of 9,999 rupees (S$196), which is a 10th of the price of Apple's iPhone Xs in the country. In the first two months of 2019, Apple shipped about 150,000 devices in India and is likely to see about a 50 per cent drop in the March quarter from the year earlier, according to Mr Shah.

A spokeswoman for Apple didn't respond to emailed questions about India production. Foxconn didn't immediately respond to an email seeking comment.

The Indian assembly line of Foxconn's Hon Hai Precision Industry Co would serve local and export markets by the time Apple announces its next iPhone models in September, the people familiar with the story said. The Taiwanese contract manufacturer, the biggest maker of iPhones, will initially invest about US$300 million to set up for Apple with investments to ramp up as capacity expands, they said.

Foxconn has two assembly sites in the southern states of Andhra Pradesh and Tamil Nadu, where it makes devices for Xiaomi and Nokia. Locating more production in India would also help diversify Apple and Foxconn's manufacturing footprint away from China amid ongoing trade tensions with the US.

In December, The Hindu newspaper reported that Foxconn would make iPhones at the Chennai plant in 2019, citing an announcement at a Cabinet meeting led by Tamil Nadu's Chief Minister Edappadi K Palaniswami. BLOOMBERG