What Makes Apple So Bullish On The Indian Market?

by CXOtoday News Desk    Apr 29, 2015

apple

While China contributed to a significant chunk of Apple’s revenue in the January-March quarter, CEO Tim Cook continues to be equally bullish on India and some other emerging markets. The tech giant sold 61.2 million iPhones in the aforesaid quarter and states emerging markets accounted for almost 40% of Apple’s revenue for the second quarter. 

Smartphone growth

There are of course reasons for Apple to be so bullish about the India market. The Indian smartphone market has reached the same point that the Chinese smartphone market was at by the end of 2013, as per a BI Intelligece report, which says growth is explosive, and competition among vendors is gaining steam as top global players lose out to a host of homegrown vendors.

In the fourth quarter of 2014, smartphone shipments in India reached roughly 23 million units, up more than fourfold compared to two years prior, according to data from IDC. ”China remains dominant in terms of raw shipment numbers, but India is where growth is now concentrated and that trend is likely to continue for the next few years,” says the report. This obviously makes smartphone players aggressive to tap the market

In India, Apple is said to control around 2% of the market share, but the Cupertino-based giant has big plans for the country. While earlier cost was a major putoff for Apple to attract Indian consumers, this time, middle class and first time smartphone buyers in emerging markets were among the major drivers of iPhone sales in January-March period. “The momentum is expected to continue,” Tim Cook told PTI. 

Pranav Sahu, an independent tech analyst states that Apple in every market, creates a bunch of raving fans, not customers unlike other brands. “Apple has managed to continue enjoying massive consumer loyalty, even as competition from Google, Samsung and others have come up over the years.” The India market - already a vibrant smartphone market - would not be an exception. A Morgan Stanley Research demonstrated that Apple is triumphant in the brand retention battle when it comes to smartphones: a staggering 90 percent of iPhone users admitted they’re sticking with the brand.

Meanwhile, Apple’s biggest rival Samsung Electronics just reported its first-quarter net income has plunged 39% as the smartphone business saw its profit shrink to less than half from a year earlier, giving the Cupertino an edge in the market.

Immense potential

A BGR report notes, Apple is strengthening its partner ecosystem too in the country and planning on setting up as many as 500 dedicated stores in India. These stores are likely to be smaller than a typical Apple Premium Reseller store that has to stock all Apple products. Besides multiplying its distribution network and working towards increasing its sales in India, Apple is now showing willingness to work closely with the government, looking to set up R&D center – showing greater commitment in terms of its growth in the country.

A senior official at Apple, John Reynolds, who heads compliance in the EMEIA region that includes India too, met telecom and IT minister Ravi Shankar Prasad early this month and gave an overview of the company’s operations in the market. Apple has been given an assurance that if it plans to set up a manufacturing facility in the country, it would get additional incentives from state governments apart from the incentive schemes announced by the Center.

TOI reports, “The government is looking to woo Apple’s key manufacturing supplier, Foxconn, into the Indian market and high-level parleys on this front have already been initiated.” The government may also extend additional support to the company and its suppliers in case they finalize plans to manufacture in India.

In the first six months of 2015 fiscal, Apple sold over 135 million iPhones, 34 million iPads and 10 million Macs. Its revenue grew 28% to more than $132 billion and net income rose by 36% to over $31 billion as compared to the six months ended March 29, 2014. Cook said that iPhone shipments have picked up significantly in the BRIC countries (Brazil, Russia, India and China). “…If you look at BRIC within the emerging markets, BRIC countries were up 64% year-over-year,” he added. 

The company’s net profit stood at $13.6 billion in the January-March quarter, while revenue was at $58 billion. About 69% of the revenue came from international sales. Cook sees a reasonable percentage of first time buyers, in India and other emerging markets. “If you look at emerging markets in general, revenue from emerging markets, just for the March quarter, was up 58% year-on-year. And a big piece of what is driving that is iPhone,” he told investors adding that “we’re very bullish on the current quarter as well.” 

Experts believe, Apple’s push for a greater investment and reach in India will help the company tap the burgeoning demand for premium smartphones.