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What Might Samsung’s Drop In India Teach Apple?

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Apple producing iPhones in India

For the first time in at least six years, Samsung (SSNLF) lost the top spot in India’s smartphone in 4Q17, according to reports by Counterpoint Research and Canalys. For Apple (AAPL), which is also pushing hard in India (INDA) and producing certain iPhones in the country, there is a lesson to be learned from Samsung’s recent slide. Samsung lost the smartphone crown in India to China’s (MCHI) Xiaomi, whose market share rose sharply from 9.0% in 4Q16 to 25% in 4Q17, according to Counterpoint Research.

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Price matters in India

The chart above illustrates how the Samsung-Xiaomi competition has played out in India in recent years, according to Canalys. There are at least two major reasons for why Samsung shed market share in India’s smartphone scene in 4Q17. One was that India’s market for mid-range smartphones (devices that cost anywhere between $150 and $230) continued to grow faster than any other smartphone segment in 4Q17. Xiaomi rode this growth with its portfolio of low-cost smartphones.

Then there is also the issue of giving autonomy to local units. Xiaomi is said to have tried hard to localize its channel strategy in India, allowing its local unit enough latitude in areas such as products and marketing.

Apple has the ingredients

If Apple’s move to produce iPhones in India was designed to help it compete in the market for cost-conscious consumers, then the company may be moving in the right direction. Local production could also provide Apple with the opportunity to better localize its channel strategy in India to benefit from what’s propelling Xiaomi. Alphabet’s (GOOGL) Google could also benefit from these lessons. Most of Apple’s revenue comes from iPhones.

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