Apple posts flat growth in India in September quarter over weakening rupee

Photo: Reuters
Apple is not growing in India at a pace its CEO Tim Cook would like it to. Cook, who has earlier called India a high-growth market with potential to match China in the next decade, admitted to analysts and investors on Thursday that the company’s growth in the second most populous nation remained flat in the quarter ended September.

Cook attributed Apple’s lacklustre performance in India and other emerging markets to weakening currencies, which forced the technology giant to raise prices of its devices in some markets. However, analysts say Apple’s growth woes in India are not limited to a weak rupee but are more systemic in nature.

“Our business in India in Q4 was flat. Obviously, we would have liked to see huge growth,” Cook said in a call with analysts. “The emerging markets that we're seeing pressure in are Turkey, India, Brazil and Russia, where currencies have weakened over the recent period. In some cases, that resulted in us raising prices and those markets are not growing the way we would like to see.”

Apple’s fiscal year starts in October and ends in September, making the July-September period its fourth quarter.

Cook in the past has pointed out that Apple was witnessing growth in high double-digits in India. In May this year, he reassured investors that the country represented a huge opportunity for the company. Apple refrained from making any comments on its India business during its Q3 earnings call, around the time when sales of its iPhone began to sag here.

While the rupee has weakened significantly in the past few months, increasing the cost of iPhones, which are largely imported into India, analysts say Apple has not revised prices of its products. While Apple does charge a premium for its iPhones in India compared to the US, a fluctuation of just 2 per cent was seen when compared to last year.

The launch of premium devices from OnePlus and Samsung in the second half of Apple’s reporting period added to Apple’s woes. Moreover, the company’s entry level line-up of devices, including the iPhone SE and iPhone 6, are over four years old, making them unappealing to customers who once preferred these devices.

Apple didn’t see any uptick in sales from its latest iPhone XS and XS Max in the fourth quarter as the devices were launched in October. But response to even these devices, the starting price for which is ~99,900, is said to be lukewarm, providing no respite to Apple from its falling India sales even in the current quarter.

“Apple has realised that India’s smartphone market has a very low average selling price (ASP) and for it to get to a point where they can cash in using scale is going to take at least four to five years. So I think they’ve realised they have to wait to tap into the potential of the India market,” said Neil Shah, research director at Counterpoint Research.

According to Counterpoint, Apple India’s revenue from smartphones was down 30 per cent in the quarter ended September, as shipments of iPhones halved in comparison to the year-ago period.

Luca Maestri, chief financial officer at Apple, did call out the strong growth of revenues from the Mac line-up in the emerging markets, including India, in his opening remarks in the call with analysts. Additionally, he said, “We generated iPad growth in a number of key regions around the world, including Latin America, Europe, Japan, India and South Asia.”

The drop in shipments of iPhones in India has had a significant impact on Apple’s already insignificant market share in the smartphone segment. From controlling 2.2 per cent of the market in Q3 2017, Apple just cornered 1 per cent of India’s smartphone market in the July-September period in 2018, according to the Counterpoint data. The company’s revenue share in the market was also down to 5 per cent in the quarter from 8 per cent in the year-ago period.

Apple India report card
  • 50%: Year-on-year decline in iPhone shipments to India in the quarter ended September 
  • 30%:  Fall in revenue from iPhones in the same period 
  • 56%: The previous generation iPhone 8 and X’s contribution to Apple’s sales 
  • 1%: Apple's market share in the smartphone segment, down from 2.2% in the year-ago quarter  

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