Here’s why India is Apple’s new China

Apple Q2 results: In the earnings call, Cook highlighted how iPhone sales has grown 56 percent year-over-year in India.

Updated: April 28, 2016 6:56 am
Apple, Apple Q2 results, Apple India Q2 results, Apple Second quarter, Apple iPhone sales drop, Apple iPhones sales, Apple iPhone, Apple India, technology, technology news Apple Q2 results showed India sales grow by 56 per cent in a bleak quarter. Seen here is a billboard ad for iPhone SE in India. (Source: Reuters)

In a quarter where almost nothing worked in favour of Apple, due to what Apple CEO Tim Cook called “macroeconomic headwinds”, India stood out. In the earnings call, Cook highlighted how iPhone sales has grown 56 percent year-over-year in India. And this is when globally there was a 16 per cent fall in the number of iPhones sold.

Tim Bajarin, president of San Jose-based research firm Creative Strategies, Inc says while Apple can continue to create premium phones at high prices, “the reality is that for most of the world who can afford these premium phones have already bought them”. This is why cheaper phones in markets like India will have to be on Apple’s radar if not already.

“For Apple to grow iPhone shares significantly they must target the mid-range at lower price points in emerging countries. The iPhone SE was a good start, but I believe they must create iPhones that have even more aggressive pricing for these new markets. It is not clear that Apple will do this, but without lower priced iPhones it will hard for Apple to ever get units sales of their smartphones back into record territory,” Bajarin told IndianExpress.com in an email interaction.

Bajarin is convinced Apple sees India as their next China. “But I think it will take up to three more years for them to really gain ground in India based on their design and pricing strategies,” he added.

Tarun Pathak of Counterpoint Research says their preliminary estimates of the India smartphone market shows Apple grew 61 per cent year over year in terms of sell-in reaching close to 630,000 units. “Wider distribution and aggressive promotional campaign surely contributed to the growth, but it was iPhone 5S performance during the quarter which led Apple to its first ever record Q1 (January-March) numbers in India,”

Pathak sees a lot of room to grow for Apple in India. “However, growth rate will be comparative slow as compared to some other regions. Unlike USA and China, India has been a highly price-conscious market with almost 70 per cent of the smartphone sales being below $150. As a result, Apple’s higher priced iPhone portfolio has limited Apple’s opportunity to grow at the same pace in this market,” he says, adding that this is why Apple is seen realigning its strategy in India, to capture young highly aspirational audience through discounting previous flagships or by selling certified pre-owned iPhones in India.

“With the Apple ecosystem being robust than ever, there is potentially a higher chance that as these young consumers become more mature smartphone users. This means a much higher probability for Apple to upgrade them in near future,” he told IndianExpress.com.

The one big reason for Apple’s fall in revenue seems to be its inability to boost sales of the iPhone in crucial markets like the US, Europe and China. “It does appear that Apple’s growth in iPhones has peaked and with their current models they will be challenged to bring iPhones sales up to sales of the past. However, Apple’s ability to grow the iPhone market again depends on how they design new phones and price them,” Bajarin explained.

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Apple’s big success over the past couple of years has been China, but that market seems to have been saturated for now. Greater China recorded a -32 percent sequential change in Q2. “China numbers were impacted by Chinese economy and especially a slowdown in demand in Hong Kong,” Bajarin underlined.

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