India is the world’s largest market for smartphones. It surpassed the U.S. for that spot in 2019 as shipping increased 7% in the previous year to 158 million units, according to Counterpoint Research. But the more price-sensitive character of that market means that it is the third largest smartphone maker in the world, Call (NASDAQ: AAPL), is a bit-and-bit player in it.
Chinese vendors dominate India’s smartphone market, thanks to their aggressive price and feature-packed devices. Apple is not even among the top five smartphone brands out there – and those top five original device manufacturers account for 92% of sales. But recently, green shoots have emerged for Apple in India.
Sales of iPhones in India jumped in the second quarter, even as the overall market grew by 51%. What is even more surprising is that the market share of Chinese sellers slipped to 72% from 81% in the first quarter. The good news is that Apple is just getting started, and preparations are expected to be made for changes that will place it in order to take a bigger bite out of this lucrative brand.
Image Source: Getty Images
Apple contractor launches a rental company in India
Indian Daily Business Standard reports that Taiwanese contractor Wistron plans to hire 10,000 workers to produce local parts for Apple’s next flagship device – the rumored iPhone 12. The contract maker has already hired 2,000 people and is expected to step up to help deliver a made in- India iPhone 12 by mid 2021.
The report says that interviews are ongoing and that the recruitment drive will happen in a phased manner. Moreover, trial production of components has presumably begun, and commercial output is expected to begin next month. It is rumored that Wistron could produce the printed circuit boards of the iPhone in India, which would be a huge deal, as that component is thought to account for half the production cost of a smartphone.
If Apple manufactures iPhone 12s in India, the country’s import tax does not have to pay 22% on them. That makes it price the smartphone there on a much more competitive level than it could with previous devices.
The base model of the iPhone 11, for example, starts at $ 699 in the US. The same device is listed at 68,300 rupees (about $ 913) on Apple’s Indian website, a difference of close to 31%. Local production should also reduce the sticker price of the device, as it would isolate it from the currency fluctuations that have historically affected the cost of iPhones in the country.
Similarly, the new iPhone SE in India is 40% higher priced than in the US. As a result, the institute device there is considered a premium smartphone, as it should ideally compete with Chinese devices in the mid-range.
These moves may not result in quick gains for Apple, of course, but investors need to look at the bigger picture.
Plenty of room for growth
India’s smartphone market still has a long way to go before it reaches saturation. In 2018, it was estimated that 610.9 million smartphones were in use in the country, which had a population of more than 1.35 billion. The smartphone’s penetration rate is expected to increase to 55% by 2023, and there is still a great opportunity for Apple to use it in that growing market.
Another thing that could play in Apple’s advantage is the broad trend of increasing average sales prices (ASP) of smartphones in India. In the second quarter of 2017, the ASP of a smartphone in India stood at $ 157, or just over 10,200 Indian rupees based on the exchange rate at the time. In 2020, the ASP of a smartphone in India is expected to reach around 15,500 rupees.
That 50% jump in ASP in just over three years indicates that Indian consumers are climbing the value chain in their smartphone purchases. That trend can be expected to continue, as India’s gross domestic product is expected to increase by close to 48% over the next four years, per third estimate.
Between the two, the predictable rise in Indian consumers’ income and better accessibility and price for iPhones in India could help Apple’s significantly expand its presence in that market, and drive growth for the company in the long run.
