Many mishits later, Apple is reportedly planning to assemble its top-end models in India.
But unless it starts competing on price, it cannot hope to take on well entrenched market leaders and could be out of the market soon. Steve Jobs actively explored a spiritual connection with India early in his life during 1974-76, but the commercial connection did not shape up when he was at the helm of Apple. The company was known to ship Apple iPhones much later in India as compared to the rest of the world and was generally not interested in growing the Indian market.
In baseball terms, a batter is out in three hits, but Apple has missed many more when it comes to India even in the post-Jobs era. The company does recognise India as a lucrative market, but it started shipping its first ‘Assembled in India’ models only in 2017. So far, Apple has only been assembling lower end SE and 6S models in the country through the local plant of Wistron Corp in Bengaluru.
In an earnings call with analysts, Apple CEO Tim Cook affirmed in May 2018, “India is the third largest smartphone market in the world. There’s huge opportunities there for us and we have extremely low share in that market overall.”
Opportunities exist, but Apple’s record of tapping them is anything but impressive. Sales in India are expected to also drop to 2 million in 2018 from 3 million last year according to Counterpoint Research. In premium smartphones, Apple’s India market share has reduced from 59% in Q4, 2016 to 25% in Q3, 2018. Overall, the company’s market share has fallen from 3.1% in Q4, 2016 to 1% in Q3, 2018.
In its latest update, Apple Inc has announced that it will be assembling its top-end iPhone models through Foxconn’s local unit for the first time in 2019 at its plant in Sriperumbudur, Tamil Nadu, according to a Reuters report. These could include the most premium handset models like those in the flagship iPhone X family.
Expansion of the plant in Sriperumbudur is expected to entail an investment of Rs 25 billion for Foxconn and could create upto 25,000 jobs according to Tamil Nadu Industries Minister Mr M C Sampath.
Apple’s India sales are also largely dominated by the cheaper iPhones. Over 50% of the sales are accounted for by handsets that predate the iPhone 8 according to technology research firm Counterpoint.
In 2017, Apple launched the iPhone X, but has been producing less of these phones due to the launch of newer versions iPhone XS and XR. Possibly Apple could instruct Foxconn to make the iPhone X in India. Details on the exact plans are still not known, however and Apple has refused to comment on the news so far. But considering Apple’s performance globally and in India, one can surmise the possible rationale for this move.
Apple is looking for ways to address tepid sales growth after it gave a lower than expected forecast for sales in the last quarter of 2018. The company said it expected revenues to reach US$ 89-93 billion during the Christmas quarter as compared to average Wall Street expectations of US$ 93 billion.
Analysts are worried that FY 2018-19 may only bring more bad news for the company. Wedbush analyst Dan Ives reduced his estimates on global iPhone sales from 218-220 million units to 210-212 million units. He bases this forecast on ‘softer demand’ for Apple’s latest models as customers are not impressed with either Apple’s upgrades or the price changes.
Moreover, Apple’s legal tussle with Qualcomm is already reflecting on the company’s plans for the launch of its 5G phone as it will have to rely on Intel chips that won’t be ready by 2019. Samsung is already planning it 5G phone launch by early 2019 in the meantime.
In this sobering global context, local assembly of its latest and most premium smartphones could help Apple bring down prices of these handsets and tap the local market in India – the world’s second largest smartphone market – more effectively. Ultimately, Apple cannot make much of a dent in the Indian market unless it chooses volume over profitability.
Even the cheapest of its new models – the XR – is selling at Rs 74,000-76,000, too expensive for average customers in India. Unless Apple competes on price, it cannot take on the market leaders like Xiaomi and Samsung. It can choose to forego short term profits, or give up on the market all together.