India is an Android nation, and no one knows that better than Apple.
Although the iPhone has been available in the world’s second-largest smartphone market since May 2011, it has failed to make a mark there. Initially seen as an aspirational status symbol among some affluent loyalists, Apple began losing ground to more affordable competitors a few years ago. Today, iPhones comprise less than 1% of the Indian smartphone market, data from market-analysis firm Canalys show.
“Apple does not have well-priced products to tackle the India market,” independent tech-policy analyst Prasanto K Roy, who previously worked with IT industry trade body NASSCOM, told Quartz. “Even at the premium range, iPhones are way over the price of comparable flagships like the Samsung Galaxy S10, and other popular brands have come into flagship territory such as OnePlus 7 Pro.”
In November, Apple appointed Nokia veteran Ashish Chowdhary as its new India head, capping years of turmoil in the region. Sanjay Kaul, who helmed Apple in India for six years, resigned in December 2017, and was followed out by national sales and distribution chief Rahul Jain, head of commercial channels Jayant Gupta, and head of telecom carrier sales Manish Sharma. Michel Coulomb, a French national serving as Apple’s managing director for south Asia since 2016, took on the additional responsibility of Kaul’s old role for much of last year.
Under Chowdhary, Apple is planting seeds in India that could ultimately, finally, make it a more important market for the tech giant. Apple declined to comment on its plans for the region, but we already know the company is working on bettering its products and price options in India, upping its focus on local manufacturing, refurbishing phones to gain market share, and opening up retail stores in India for the first time.
The promise of iPhone 11
Last year, iPhone shipments in India hit their lowest level since 2014, according to Canalys.
It’s possible that the costly iPhone X, and other Apple phones launched in 2017, didn’t sit well with Indian consumers, a handful of analysts told Quartz. The X’s starting price—Rs85,000, or roughly $1,196—set it apart from many of its competitors, whose top devices at the time cost under Rs40,000 (around $516). A new 20% customs duty on imported mobile phones—a tariff aimed at protecting Indian manufacturing—didn’t help, nor did the fact that the iPhone X’s features weren’t anything special.
Apple is learning from those mistakes. Analysts say the iPhone 11 (starting at Rs64,900/$916), 11 Pro (Rs99,900/$1,411) and 11 Pro Max (Rs109,900/$1552), made available in India in September, are better-quality and better-priced than their predecessors.
“Initial reports suggest the [iPhone 11] camera is possibly the best in the market, and larger battery is giving more screen time to the user,” says Navkendar Singh, research director at International Data Corporation (IDC) India. “Apart from this, Apple enjoys a disproportionate brand premium versus any other smartphone brand and this is indicative of the huge number of upgraders from previous generation iPhones (7, 8, X, XR, etc.) who keep their phones for two to three years and should be looking to spend now on this new series.”
Some reviews even describe the iPhone 11 as the best low-cost iPhone to ever hit the market. “Apple’s new iPhones this year are cheaper and launched earlier than last year,” says Neil Mawston, executive director of wireless device strategies at US-based Strategy Analytics. “If your phones cost less, and are available for longer, you will sell more.”
In a value-conscious market like India, however, where most smartphones cost under $200, even Apple’s new prices are unattainable for many. And Apple products have always been 10%-18% more expensive in India than elsewhere in Asia. Thus demand for devices actually purchased in India could remain low, warns Canalys analyst Rushabh Doshi. Even if more Indians purchase iPhones, they may do so in foreign countries.
The Diwali festive season between September and the end of the year could turn things around though, as Indian customers tend to loosen their purse strings during the holidays.
Apple has also slashed the price of older iPhone models, starting with the iPhone 7, by at least Rs10,000 (roughly $140), a recent report by CyberMedia Research (CMR), noted. When Apple dropped the price of the iPhone Xr, initially priced at Rs76,900 ($1,083), by a whopping Rs27,000 ($380) in India this year, sales skyrocketed. Revenue for Apple’s “rest of Asia” region (which includes India, but not China or Japan) jumped by over 13% in the most recent quarter, to about $3.6 billion. In May, Apple CEO Tim Cook said price corrections boosted sales in the country.
“Each Apple device attains a [peak] at debut, that sustains it for the first quarter, and then hits a plateau,” the CMR report said. “However, Apple’s initiatives to bring new incentives and trade-in offers will help keep it in good stead.”
Still, there’s a long road ahead. In a recent YouGov survey, Apple’s iPhone generated the most buzz among Indians when compared to other major smartphones. It also ranked highest in terms of perceived quality. But OnePlus’s devices ranked higher with people recommending a brand to others, and on whether respondents would consider purchasing a specific brand.
In theory, one way Apple could attempt to make its phones more affordable in India is to manufacture them locally. The Indian government is going all-out to make India an attractive manufacturing hub for smartphone-makers like Apple, right when a slew of brands are shifting manufacturing bases out of China due to its ongoing trade war with the US. For its part, Apple is planning to invest $1 billion in India and export “Made in India” phones across the globe.
“Not only will the company be able to circumvent 20% import tariffs that are imposed on smartphones that come in the country, opening manufacturing facilities in India would provide employment to the citizens of India,” says Sukriti Seth, consultant at TechSci Research. “It will also boost Apple sales, as the prices of iPhones in India would fall and a greater number of people in the country would find it affordable to buy an iPhone.”
The Indian information-technology ministry has already approved plans by Apple’s Taiwanese manufacturer, Wistron, to pump Rs5,000 crore ($701 million) into production of iPhones at its plant in Karnataka in India. Wistron has been producing the older iPhone SE and 6S models in India, and in April added the iPhone 7 to that list.
Foxconn, which produces the iPhone X, XS, and XS Max at its plant in Sriperumbudur, near Chennai, is also investing Rs2,500 crore ($351 million) to increase its production capacity. Reports suggest Foxconn’s iPhone 11 production in India could hit 250,000 units per month, with roughly 75% of those devices going to other markets.
Apple has wanted for awhile to sell company-certified refurbished iPhones in India by importing old models and fixing them up locally. By selling these cheaper alternatives, Apple hopes to penetrate India’s non-iPhone user base and attract more loyal customers. Remodeling old iPhones also has a smaller environmental impact than building new ones.
To date, the Indian government has been staunchly against the idea of Apple selling refurbished iPhones, due to the country’s snowballing e-waste problem. Authorities don’t want foreign companies “dumping” electronics in India in the hopes that local organizations will refurbish them.
Apple got a sliver of hope in May, when a new rule started allowing the import of refurbished electronic goods. But it won’t be easy: These goods need clearance from the the Directorate General of Foreign Trade (DGFT) and the Bureau of Indian Standards (BIS), which is an onerous process.
Political wrangling aside, Indian consumers may themselves not love the idea of buying older Apple phones, especially when competitors’ new devices do many of the same things. Even if prices for Apple’s second-hand handsets were to come down to between Rs20,000 ($281) and 30,000 ($422), Roy says, “at those prices, users would inevitably compare against new handsets from Xiaomi, OnePlus, and other major brands that rule the midrange.”
Apple has been planning to open its first store in India for three years. In May 2016, Cook made his first trip to India, where he met the prime minister, attended Bollywood parties and cricket matches, and even prayed at a Ganesha temple. His goodwill tour paid off; within a month, Apple had secured permission to open stores in the country.
Except it never got around to doing so, because Apple didn’t meet a rule requiring it to locally source at least 30% of its raw materials. (India mandates that companies with over 51% foreign investment source 30% of their products locally.) Apple currently sells its products in India through third-party retailers such as Maple and Nyasa, or via online portals such as Amazon and Paytm Mall.
The government has since suggested it would relax those sourcing requirements, and as of May 2019 Apple had apparently shortlisted some retail locations in Mumbai. Analysts expect the first store to open in late 2020. Already, Apple has more than 500 retail locations around the world, including many in China and Hong Kong, another growth market for the company.
“Apple is known for its retail stores, the experience they provide in terms of purchase, staff knowledge and other services,” IDC’s Singh says. “Considering the importance of offline as a channel in a diverse country like India, where consumers love to touch, feel and experience the products, the stores are a very important touchpoint for any consumer company.”
Although iPhones have long been Apple’s most important product, accounting at times for over two-thirds of its revenue, the company’s other offerings could also provide a lifeline in India, one that is perhaps currently under the radar.
Services is a huge business for Apple in the West. Despite there being no official breakdown of how those services are faring in India, the company is consciously pricing them for the cost-sensitive Indian market. Apple Music, for instance, has plans starting at Rs120 ($1.74) per month in India, compared with $10 in the US. Apple’s upcoming streaming service, Apple TV+, is set to launch in India for Rs99 ($1.40) a month—less than Netflix (Rs500/$7.06) and Amazon (Rs129/$1.82 for Prime) charge in the country, and a significant drop from the $4.99 Apple TV+ will cost in the US.
Apple’s computer and tablet devices are also strong sellers in India. “In the tablet segment, Apple leads the market, followed by Lenovo,” says Seth from TechSci.
MacBooks, while a comparatively small sliver of the market, also have affordable prices, and are finding corporate customers. “Large IT companies like Accenture have a full integrated system of MacBook in their organizations,” Seth notes, “which boosts the demand for MacBooks in the country.”
India has become an especially important market for Apple as the company struggles to capitalize on its investments in China. In 2016, Beijing forced Apple to cut access to the iTunes movie store, iBooks, and the New York Times app in the country. That same year, many Chinese users reported their iPhone 6 and 6s devices were abruptly shutting off; others were spontaneously exploding. Apple has also faced more quotidian issues in the region, including lagging consumer demand and lack of competitive pricing. In January, the company lowered its revenue forecast for the first time since 2002, in part because of the iPhone’s weak performance in China.
India, too, will remain a difficult market for Apple to crack, but with income as the biggest barrier. At $2,015, India’s per capita income is considerably lower than China’s ($9,770), let alone the US (over $60,000). Apple will need to price its devices aggressively in India, without losing the aspirational sheen that earned it local customers in the first place.