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Can Apple Expand the iPhone Market in India?

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Besides the investment of $1 billion announced on Monday, Apple (AAPL) also plans to expand its iPhone market in India by opening three retail stores. With a population of 1.3 billion, Apple sees immense opportunities for its iPhone market in India. The company is mainly benefiting from India’s earnest attempts to attract foreign investors. The country decided to relax the FDI norms for various sectors including single-brand retail. The retail stores allow Apple to capture a bigger iPhone market in India.

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Apple’s iPhone market in China

On September 10, Apple launched the iPhone 11, an affordable hi-tech smartphone, along with three others. If we connect the dots, we can see that Apple sees India as a potential market for its affordable iPhone 11. The smartphone market in India is the second-largest in the world.

Canalsys indicated that smartphone shipments across the world fell 6.8% YoY (year-over-year) to the lowest level in half a decade. Apple’s iPhones were hit the worst with a 23.2% annual decline.

Apple CEO Tim Cook blamed the weakness in Chinese markets for weaker iPhone sales. Earlier this year, Cook told CNBC, “If you look at our results, our shortfall is over 100 percent from iPhone, and it’s primarily in greater China.” In the third quarter of fiscal 2018, Apple saw a rebound in the Chinese market, but it still has a long way to go. Apple plans to relocate the production base. The company also wants to capitalize on Indian markets to push iPhone sales.

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India’s smartphone market

India is quite an anomaly. The country continues to show strong momentum despite global weakness in the smartphone market. The number of smartphone users in India increases every year. Counterpoint revealed that India reached 450 million smartphone users this year from 350 million in 2018. A study by Cisco revealed that the number of smartphone users in India will likely grow to 829 million.

Xiaomi commands 28.3% of the market in India, followed by Samsung with a 25.3% market share. Apple commands a minuscule share in the Indian smartphone market. The IDC reported that handset shipments in India rose 9.9% annually to 36.9 million.

India sees interest in the premium segment

India’s smartphone market is price sensitive. Indian consumers want to upgrade specs but at low prices. The IDC revealed that the average selling price of a handset during the June quarter was $159. However, things are changing gradually. The IDC report stated that growth in the smartphone segment of $200–$300 has doubled in India. The $400–$600 market is also witnessing 16% annual growth. OnePlus and Apple are the key players in the premium segment.

In the ultra-premium segment above $500, Apple led with a 41% market share in the second quarter. The 22% price drop in iPhone XR did the trick. The response helped Apple take a serious look at India as a potential destination.

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Apple’s profit doubled in India in fiscal 2018

In Apple’s third-quarter results, the company stated that its revenues from India grew in the “strong double digits.” The Economic Times reported that according to Apple India’s filing with the Indian Registrar of Companies, the net profit doubled and the revenues increased 12% in fiscal 2018. More sales of relatively high-end models like the iPhone 7 and iPhone 6 boosted Apple profits in India.

Strategy for India’s smartphone market

Apple’s exclusive retail stores in India should strengthen its foothold in the country. The company wants to capture a larger market share and keep its premium image. The iconic feel of the flagship Apple stores in New York, London, and Paris will be replicated in the first Mumbai store.

The competition for smartphones in Indian markets is largely based on the price. However, I think that Apple will uphold its exclusivity despite introducing cheaper iPhones to enhance its appeal in India. The country has a price-sensitive market. However, the premium brands segment is gaining traction. There are only a handful of players in the segment. As a result, Apple should focus on getting a bigger piece of the segment.

Apple’s renewed interest in India is well-timed. On one hand, the growth from Chinese markets is dwindling, while India is at the cusp of growth. Earlier this year, Cook said, “India is a very important market in the long term. It’s a challenging market in the short term, but we’re learning a lot. We plan on going in there with sort of all of our might.”

I think that besides price cuts, Apple needs to revamp its marketing strategies to be more India-oriented for better results. Apple has taken the first step. We’ll have to see how the company navigates the tricky Indian markets.

On Wednesday, Apple stock closed in the green at $222.77. The share has grown more than 40% YTD (year-to-date). In Amazon (AMZN) has 21%, Google (GOOG) has 19%, and Netflix (NFLX) has 8% YTD growth.

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