Apple Inc’s revenue growth in India, one of its fastest-growing markets, slid sharply during fiscal 2017—but there’s no reason for the company to panic.
The Cupertino-based firm’s revenue from India grew 17% to Rs11,619 crore ($1.8 billion) during the year ended March 2017, according to documents filed with the ministry of corporate affairs on Dec. 12. This is not only far less impressive than the 53% revenue growth it logged the previous year, it was also the lowest in six years.
The slide, however, was not due to lower sales but because, with each passing year, there are more Apple users in India, analysts said.
“The user base was initially very small, so year-on-year growth was big,” Jaipal Singh, senior market analyst for client devices at International Data Corporation (IDC), told Quartz. “The base had grown significantly by last year already; it touched a certain level where further growth was slower. Still, India definitely holds a lot of potential.”
Besides the higher user base, the average selling price of iPhones in India fell 2% as old models worth between $350 and $400 had more takers compared to newer models, Tarun Pathak, an associate director with Hong Kong-based Counterpoint Analytics, told Quartz.
E-commerce channels, which account for 40% of the total iPhone sales in India, are selling mostly older models, Pathak added.
Back in 2015, over half of the iPhones sold were priced above $700, according to the IDC. In 2016, however, models priced over $700 contributed to just about a third of the total sales, while 40% came from the sub-$400 category, the Economic Times reported.
Old iPhone models sell more in India because they are cheaper. ”After some months, those (old models) get more affordable for Indian markets,” Singh of IDC said.
Also, Apple’s most recent earnings period coincided with a time when buyers were holding back on purchases—especially of the then-new iPhone 7—in anticipation of the company’s much-hyped 10th anniversary iPhone X, Rushabh Doshi, an analyst at Singapore-based market research firm Canalys, told Quartz.
Though its revenue growth did take a hit, selling cheaper devices is a good sign for Apple in India. As India won’t let Apple sell refurbished second-hand devices at the moment, these cheaper handsets serve as an entry-point to the Apple ecosystem. It’s also why the company resurrected the iPhone 6 at a lower price earlier this year.
“It’s not about selling new iPhones, it’s about selling iPhones,” Pathak of Counterpoint said. “A user might upgrade to newer iPhones going forward.”
Meanwhile, except for tablets, revenue growth from all Apple devices slipped in India during fiscal 2017.
“Macbooks are not the preferred choice for most businesses in India due to their high upfront cost that puts a huge pressure on capital investment for small and medium businesses,” Doshi said. So, for bigger volumes, Apple must piggyback on vendor partners and sell more of its devices in the enterprise space.
As for phones, it already dominates the premium segment in India. To gain more market share, every successive year, it has been closing the gap between the iPhone launch dates abroad and in India.
Also, iPhone sales are likely to pick up next year, Doshi estimates, crediting the launch of new devices like the iPhone 8 and iPhone X for this. These handsets generated more buzz than the iPhone 7, and their sales will likely reflect that excitement, he added.