Apple May Tweak India Strategy In Bid To Increase Market Share

Apple Inc. is likely to make some adjustments to its India strategy to improve its market share in the world’s second-largest market for mobile phones. As part of the strategy, the iPhone maker is expected to boost its manufacturing capacity and open branded retail stores.

After announcing its fiscal-second-quarter earnings on Tuesday, chief executive Tim Cook told analysts that Apple, which only assembles the iPhone 7 in India, will increase local manufacturing, Press Trust of India reported.

According to Cook, a temporary 22% drop in price for the iPhone XR in April taught Apple something, as it helped the company increase sales.

Apple iPhones account for less than 1% of the Indian smartphone market, largely dominated by vendors such as Samsung and Xiaomi.

The slowdown in the Chinese market is yet another reason for Apple’s renewed interest in India.

“All other markets have already saturated for them and the other ones such as Africa are yet to arrive. The largest opportunity for them outside of the US is India,” said Faisal Kawoosa, founder and chief analyst of market researcher techARC.

Tarun Pathak, associate director, Counterpoint Research, said: “Even India cannot offset the decline that Apple is seeing in its key markets. China is a huge market for Apple and even after a slow down, the volume of phones sold there is a lot more than in India.”

Apple currently pays 20% import tax on every handset it ships to the country, which makes its products costlier than in the US. For instance, the iPhone XR started retailing at $749 (approx Rs. 52,809 after conversion) in the US but was sold in India for Rs. 76,900.

“Local manufacturing will help them bring down the price. But they need to understand that the definition of premium has changed in India after the arrival of OnePlus. Even if they manage to bring down the price, their phones will be available in the leagues of premium smartphones by Samsung and Google, and that market is less than 1%,” said Kawoosa.

Counterpoint’s Pathak said that even a price cut of 10-20% is a big deal in markets like India. “Although Apple will have to start things from scratch, be it in terms of manufacturing or improving market share, the fact that nothing is wrong with their products makes them positive about their India prospects.”

Another area where there is a huge gulf between India and the US is Apple services, which account for a major chunk of the company’s revenues.

However, most of its services, barring Apple Music and the App Store, are not available to users in India.

Pathak pointed out that the push in the services business will depend on the device base. Eventually, if the device base increases, there will be users who will pay for the services, he said. “Once Apple has the user base, they can even create plenty of India-specific content, too.”

In a January interview to CNBC, Cook had said that India is an important market and Apple would like to set up stores but would like to see reduced duty on its products.―Livemint