Why Apple has struggled in India
Apple (AAPL) has been struggling to sell its iPhones in India, the second-biggest smartphone market in the world, for several reasons, including low-income and price-sensitive consumers, the availability of value-for-money handsets (such as those made by Xiaomi), and much higher rates in India than in the United States.
The iPhone XS costs over $1,400 in India compared to $999 in the United States. The higher cost is the result of the high luxury tax levied by the Indian government on imported items. All these factors mean that Apple has a negligible market share in one of the fastest-growing major smartphone markets.
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Apple is hoping to avoid a hefty luxury tax
A few months ago, the Wall Street Journal and Reuters reported that Apple’s biggest supplier, Foxconn, would start making the latest iPhones in India to avoid heavy tariffs.
Now, according to a report by Bloomberg, Foxconn is “within weeks” of beginning its trial production of Apple’s latest flagship phones. The report said that the trial would start before the company starts full-fledged production at its factory near Chennai.
Smartphone sales in India reached 137.2 million in 2018
According to Canalys, total smartphone shipments in India were 137.2 million in 2018, a solid 9.9% rise over 2017. Xiaomi and Samsung (SSNLF) have cornered an aggregate of 55.7% of the Indian market. In fifth place is a local company called Micromax with a market share of 3.4%. Apple doesn’t appear in the top five.
By circumventing the high luxury tax, Apple hopes that it will be able to increase its share in India—which is essential, as its business in China is dwindling. Apple’s total revenue from the Greater China region fell over 26% year-over-year in the first quarter of fiscal 2019, which was the main reason why Apple’s revenue shrank in the period.