As Iphone Sales Grow 50 Percent, Apple Looks to India to be its New China

As the technology giant Apple Inc. touted the potential of new growth markets, its chief executive Tim Cook said that Apple’s iPhone sales in India grew by more than 50 percent in the company’s fiscal year. However, analysts said that it won’t be easy for the company to crack the world’s largest democracy.

As iPhone sales fell for the third straight quarter,  the U.S. firm reported its first annual revenue decline since 2001 on Tuesday.

According to the company’s results, revenues in the world’s second-largest economy fell 30 percent year-on-year in the fiscal fourth quarter as Apple has been looking to new countries such as China to drive growth. Tough competition from local players like Huawei, combined with regulatory hurdles, have held back the company’s progress but Cook, nonetheless, remained bullish on China.

And hence with the population expected to boom further and noting that half of Indians are aged under 25, Cook has turned to India.

“Our iPhone sales in India were up over 50 percent in fiscal 2016 compared to the prior year, and we believe we’re just beginning to scratch the surface of this large and growing market opportunity,” Cook said on an investor call after earnings were released.

“The truth is there’s going to be a lot of people there and a lot of people in the middle class that will really want a smartphone, and I think we can compete well for some percentage of those. And given our starting point, even though we’ve been growing a lot, there’s a lot of headroom there in our mind. So, we’re working very hard to realize that opportunity,” he added in response to an analyst question.

Reliance Jio, which is boosting the country’s 4G mobile internet infrastructure coverage to 18,000 cities and 200,000 villages, is partnering with Apple, Cook highlighted. Cook said that jointly they are offering a free year of service to purchasers of new iPhones.

Despite almost 125 million smartphones set to be sold in total this year, in India iPhones are still a small player and like China, India will be a tough market to crack for Apple.

According to Counterpoint research, Apple got a 2.2 percent market share as the company shipped around 2.5 million units between October 2015 and September 2016. Apple could struggle to penetrate a country that is used to buying cheaper devices even while the shipment is up from the 1.6 percent share in the previous year.

“We think lack of affordability will likely limit the potential upside from the region,” Mizuho said in a note on Tuesday, adding that “India might offer about $10 billion of incremental revenue opportunity in five years, which might not move the needle for Apple.”

India is unlikely to contribute to more than two-to-three percent of total sales over the next couple of years, Mizuho said in a note from earlier this year.

Starting at $600, Apple’s cheapest new generation model iPhone in India is the SE, and that is a problem. According to Neil Shah, research director of devices and ecosystems at Counterpoint Research, that price point and above makes up around three-to-four percent of the total smartphone market.

“The opportunity for the market is limited,” Shah said.

(Adapted from CNBC)

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