Is India Apple’s Next Growth Market After China?

by Priyanka Pugaokar    Apr 28, 2016


After leading the mobile industry for nearly 13 years, Apple posted its first ever decline in iPhone sale and drop in revenue in the second quarter of this fiscal. While the sales curve of iPhone in China is moving downside, Apple has shifted its focus on the prospering India market.

The company is optimistic to find out a way to strengthen its roots in the country. Though Apple is aiming to capture a share in the smartphone market, the global and homegrown players with their tight hold on the market segments are not going to make it an easy game for Apple.

Apple revealed its second quarter results on Tuesday posting a first ever drop in iPhone sales and revenue since 2003 and its revenue stood at $50.6 billion at a decline 9 per cent. Apple’s revenue in Greater China, which is considered to be its largest market after US fell 26 per cent from a year earlier. The result clearly shows Apple’s struggle in the developed markets, which have now reached at the point of saturation. Therefore, the company is now contemplating to explore newer markets with high growth prospects.

After the rollout of several crucial initiatives by PM Modi lead government, such as Make in India, Digital India, Skill India, etc., the country is a central point of investments for investors across the verticals. Several global smartphone makers are exploring growth opportunities in the booming mobile industry in the country. India has surpassed the United States to become the second largest smartphone market in the world with 23 per cent you growth. Also the 4G rollout is expected to further fuel the growth of smartphone business in the country. Apple aims to capitalize on these favorable factors in the country.

Why India Matters?

While Apple posted a 9 per cent drop in its global iPhone sales and 23 per cent decrease in China, its India business grew by a whooping 56 per cent. While iPhone sale has slowed down in China, the company expects a double digit growth in India. According to Counterpoint Research, iPhone sales in the January-March period in India hit a record 630,000 units and the market tracker now forecasts they will rise to 3 million in the calendar year, compared with just over 2 million in 2015.

Apple CEO Tim Cook’s India visit in 2015 indicated its major expansion plans in the country. Apple, however, did not reveal the details of Cook’s meeting with PM Narendra Modi at that point of time, the company is serious about its business expansion in the country. The company does not officially report India sales separately, but according to reports, revenues from the country stood at $1 billion (around INR 6,600 crore) in 2015.

Also Read: Is The Era Of Robust Smartphone Growth Over?

Expansion Plans

Apple has accelerated expansion in India in the last 18 months, including widening its retail reach to smaller shops. To facilitate the double digit growth, Apple has also applied for a license to open single brand stores in the country.

The company is looking at improving iPhone sales in newer geographies. Apple has routed its business through offline channel and the company sales through five major distributors: Optiemus, Brightstar, Redington, Ingram Micro and Bettel. Of these, Redington is still handling a vast majority of the Apple inventory.

The 4G Factor

Smartphone makers in India are optimistic about the 4G rollout and its potential in the coming months. India’s top telcos Bharti Airtel, Vodafone India and Idea Cellular are extending 4G networks across the country ahead of the commercial launch of such services by Reliance Jio Infocomm. Apple expects that better network and broadband will unleash the power and capability of the iPhone.

Currently, many crucial Apple services are still missing on iPhones in India like the ability to show places nearby, Transit feature on Maps, Apple Pay etc. With the 4G play, the company expects to get traction among Indian users for some of its technology innovations in iPhone.

Also Read: By 2020, 98% Of Global Handsets Will Be Smartphones

Stiff Competition

Though the global leadership of Apple is betting big on the India market, stiff competition among the domestic and global smartphone makers and high segmentation of the smartphone market is going to make Apple’s way hard. Often termed as a ‘class product’, Apple’s iPhone currently holds only about 2 per cent market share in India.

Samsung leads the list with around 28 per cent market share and home grown Micromax holds around 15 per cent share in the smartphone business. According to Counterpoint study, Apple had 3 per cent of the smartphone market by volume and 11 percent by value in Q1 of 2016. Apple ranked behind competition in terms of volume, where Samsung, Micromax and Lenovo lead, according to initial estimates. The numbers itself states that Apple has to go a long way to lead in the list of top smartphone vendors in India.

The other challenge is, even though Apple has witnessed steady and constant growth in India, it is still largely considered as a ‘class product’. However, the lower and mid range smartphone segments are the biggest contributors of the industry growth. Therefore, Apple’s growth in India is largely attributable to brand pull among iPhone lovers aided by installment and buyback schemes, besides the company’s increased retail expansion.

As a result, it would be interesting to see that how Apple frames its business strategies for the price-conscious market and how India contributes to Apple’s global growth.