Apple's fading India dream

Is Apple giving up on India, allowing a free run to Chinese handset companies? It certainly looks that way at first sight. This week, in his traditional keynote speech, Apple CEO Tim Cook launched the newest versions of the company’s flagship product, the iPhone. The highlight was the iPhone X, with various top-of-the-line features such as facial recognition and a bezel-less screen. It is priced at $1,000 in the US market. This means that, in India, it might cost close to, or even over, Rs 1 lakh. Alongside the iPhone X, two other iPhones were announced, which will be regular upgrades of the current flagships, the iPhone 7 and iPhone 7 Plus. In the US they will be more expensive than their predecessors, suggesting that they may retail at only Rs 25,000 or Rs 30,000 less than the iPhone X in India, making them again the most expensive phones in the Indian market.

Meanwhile, Chinese phone companies are pricing phones with equivalent features at a fraction of the price. Some of these phones even come in boxes with “Make in India” written on the top, along with the campaign’s trademark lion. Apple has a negligible share in the Indian market; its investors will expect it to increase that share if its sky-high stock price is to be justified. The North American and, to an extent, the European markets are saturated; China is slowly maturing; growth will come in India and Africa. And finding that growth is important for Apple, which is clearly showing signs of strain. The company’s first locally assembled device, the iPhone SE has managed to get just 2.4 per cent of the mid-range (Rs 15,000-30,000) smartphone market in India in the quarter ended June this year. Apple sells around 30,000 units of the iPhone SE in India on a monthly basis, utilising less than half the capacity of its contract manufacturer. Worldwide, according to the market research firm Gartner, Apple was the only phone company to actually see sales decrease in the first quarter of the 2017-18 financial year. As a result, it has a 12.1 per cent share of the smartphone market, against a 12.7 per cent share in the first quarter of the 2016-17 financial year.

But does the giant company have a plan to deal with the price-sensitive Indian market? The answer may be in the negative. In the past, at least, it accepted the fact that it needed to consider specific Indian conditions. It released, for example, the lower-cost iPhone 5c a fewer years ago, which had colourful plastic cases instead of brushed metal, in order to grow beyond its traditional clientele. More recently, it produced the iPhone SE, which was shaped like the iPhone 5 but had an upgraded microchip. But this year there was no such emerging market-focused variant of the iPhone on offer. This is an extraordinary omission.

Perhaps it suggests that Apple is returning to its roots; its founder Steve Jobs was always strongly against the idea of a “cheaper” variant of any Apple product, arguing that the power of the Apple brand lay in its premium image. But it must be said that Jobs had little or no understanding of markets beyond those in developed countries, and Apple needs to grow beyond its founder’s vision. A Rs 1 lakh phone might be what Jobs had in mind but it will not be what Apple shareholders need if the company they own is to break into India, a country where rival Samsung already has a 24 per cent market share and Chinese companies are nipping at the South Korean behemoth’s heels.

Apple has had a good 10 years; it has ridden the iPhone’s success to become the largest company in the S&P 500 by market capitalisation. To keep that status, it needs new ideas and not just new iPhones.

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