In a recent Apple commercial on Indian TV channels, a stunning Indian bride on her wedding day coyly shows off bits of her attire and her henna-d hand to her bridegroom using FaceTime on her iPhone. She keeps her face hidden till she finally shows up in front of her husband-to-be at the venue. For Apple which has begun to see glimpses of the potential in India, the bashful bride in the commercial could be an apt analogy for the market.
With iPhone sales cooling in neighboring China, a procession of senior Apple executives has traveled to India, the world’s fastest growing smartphone market, in the past months. As Apple CEO Tim Cook said in an earnings call earlier this week, “We have been putting increasingly more energy in India”.
Several reasons are compelling Apple to focus on India, soon-to-be the world’s second-largest smartphone market (after China, overtaking the United States), where the sales of iPhones have risen from 200K units-per-quarter a few quarters ago to an estimated 800K units in the most recent quarter.
Now, a sales target of a million iPhones is within breaching distance in a country where the installed base of smartphones is very low. According to Counterpoint Technology Research’s senior analyst Tarun Pathak, 106 million smartphones were sold in India in 2015 but 300 million more smartphones are expected to be sold in the next two years. Significantly, Apple has only about 1 percent share of this booming smartphone market. “It is a huge, enticing market that just cannot be disregarded,” says Pathak. "India is a high-potential market not only in terms of volume but also the massive scale and opportunity that lies ahead."
India’s smartphone boom started just a couple of years ago and even today only 40% of all phones sold in India are smartphones as compared with 90% in China, making China a saturated market. “The potential to convert Indian smartphone buyers into iPhone buyers is rising rapidly, that is why the market has become more interesting for Apple,” says Anshul Gupta, a research director at
For many young Indians, an iPhone is an aspirational buy. Apple sold thousands of iPhones last year when it dropped the price of its last-gen iPhone 5s model. In the last quarter of 2014, at least half of all iPhones sold were older models. As in other emerging markets, Apple’s India strategy is obviously to sell more iPhones. “Apple is focusing on locking more and more users into the ecosystem, its strategy is to sell more iPhones and not necessarily new iPhones,” says Pathak. Once it improves the installed base of iPhones in India, Apple can focus on upgrading these users to its newest models.
India is a challenging market for Apple, mainly because it has weaker spending power than other markets like China. So device makers like Samsung and OnePlus have outdone Apple’s sales numbers by selling Android-powered phones with superior specs for far less. Apple's latest iPhone 6s faced a sales slump when it launched last year and distributors struggled with static inventories because of its steep prices (even higher than Western markets). When its retailers and distributors eventually got more flexibility in addressing pricing challenges (the 6s model still costs about $1,000) and made at least two price tweaks for the latest model, sales began to warm up.
In the past few quarters, Apple has made a series of other strategic moves including improving its distribution network. To its roster of two distributors, the firm now has added three more. It has changed its big-city focus and has moved its distribution network to smaller cities. It has made its Apple Music and iCloud services more affordable to Indian users. A recent application to open exclusive Apple stores is pending with the government.
Even with all this, India will continue to be tough going for Apple as it takes on rival phone makers - domestic, Chinese and global – who have converged on the world’s largest untapped smartphone market and are locked in a fierce fight for market share.
