Apple eyes India to drive sales as global growth slumps

Reports 76% growth in India in Oct-Dec

Even as it reported its slowest growth in iPhone sales since the device’s launch in 2007, technology giant Apple is betting big on India to drive future growth. Globally, iPhone sales grew by just 0.4 per cent, whereas sales of its flagship device grew by 76 per cent in India during the October to December quarter.

On Wednesday, Apple reported its highest-ever quarterly profit of $18.4 billion on a revenue of $75.9 billion during the period (Q1 for Apple), but investor sentiment was at best low. Save for India, growth in other regions such as the US and China has plateaued. In the ongoing quarter (January-March 2016), the company expects iPhone sales to fall for the first time.

CEO Tim Cook lauded the Indian government for being “very interested in economic reforms”, pointing to the country’s potential to offer a conducive business environment in the future, during a call with investors to review Apple’s financial results.

“India’s growth, as you know, is very good. It’s quickly becoming the fastest-growing BRICS (Brazil, Russia, India, China and South Africa) country. It’s the third-largest smartphone market in the world after China and the United States,” said Cook. He added that Apple’s revenues in India grew by 38 per cent during the quarter in reported currency while in constant currency the growth was 48 per cent.

 

In India, Apple launched the iPhone 6s and 6s Plus in October, priced at a premium of nearly Rs 10,000 when compared to the previous generation devices. Sales growth in India is expected to have come from increasing sales of the iPhone 6 and 5s models that received hefty price cuts following the launch of newer devices.

“Apple, on an average, shipped almost half a million iPhones per quarter (in 2015) with just two per cent volume market share though almost 10 per cent revenue share. However, in comparison, the growth in Apple’s bigger markets such as the US or China has peaked, and India which is the next big market in volumes is a significant opportunity for Apple,” said Niel Shah, director at CounterPoint Research.

India, which has nearly a billion mobile subscribers, is all set to become the second largest smartphone market in the world this year, overtaking the US.

Unlike the US, nearly 70 per cent of smartphones sold in the country cost less than $150, meaning Apple’s premium iPhone portfolio has limited scope.

“India is a mobile-first country with more than half of the population being young. There is a higher chance that as these consumers become mature smartphone users, Apple will be able to rope them in with its robust and attractive ecosystem, and its portfolio, which has become a coveted status symbol,” added Shah.

In order to maximise this growth, Apple has already expanded its network from just one to five distributors in the country in the last 15 months. The company recently sent a proposal to the Department of Industrial Policy & Promotion for permission to set up a wholly-owned wholesale subsidiary in India.

Recently, Apple’s country manager for India, Maneesh Dhir, who had been in the role since 2010, put in his papers. His departure follows Sharad Mehrotra, enterprise mobility head of Apple India, who stepped down to launch Hyve Mobility, a company that aims to build smartphones based on the Android operating system. Mehrotra was with Apple India since 2007.

Prime Minister Narendra Modi, during his visit to Silicon Valley last year had met Cook, discussing the possibility of setting up a manufacturing unit in the country. Foxconn, the largest manufacturer of iPhones for Apple, already has a significant presence in the country. But it does not make Apple devices in India yet.