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Apple (NASDAQ: AAPL) It’s running out of places to sell iPhones at regular prices.
It is not an idea that everyone agrees with. Even if the Americas market is approaching plausible saturation, China and the rest of Asia, in particular India, still have great growth potential. In fact, with the first Apple store opening in India next year, it is clear that Apple is ready to seize the opportunity.
It’s not a bad bet, either, on the surface. Although India last year became the world’s second-largest smartphone market, according to data from Counterpoint Research, the 158 million smartphones sold in India in 2019 represent only about 11% of its population of 1.37 billion. people. That leaves room for smartphone market growth of the order of 11% to 14% annually for the next several years, according to the forecaster. And unlike other parts of the world, India’s smartphone sales are on a clear growth trajectory.
However, shareholders who count on this market as a growth engine for Apple’s iPhone may want to think again.
Image source: Getty Images.
IPhone is losing steam
Don’t jump to extreme conclusions. The iPhone is still a powerhouse. The sale of applications and digital downloads facilitated by these devices is an increasingly important piece of Apple’s revenue mix. But iPhone sales of $ 137.8 billion from its recently ended fiscal year still made up the bulk of its business, accounting for half of the company’s gross revenue.
However, like it or not, iPhone revenues are declining. The following graphic tells the story.
Data Source: Apple Investor Quarterly Reports. Chart by author.
Market research company IDC develops the idea in a slightly different way. By plotting your estimated iPhone unit sales (as opposed to iPhone revenue that Apple still publishes) for each quarter of the past few years, it shows us that iPhone unit sales are shrinking, as are overall smartphone sales. .
Data source: IDC. Chart by author.
Some suggest that India could be a reason to expect rekindled iPhone growth. The country is now at the heart of your smartphone evolution. That new business is at stake and it is clear that some manufacturers are taking advantage of it.
Data source: IDC and Canalys. Chart by author.
However, the reality of the matter is that Apple has not proven to be a particularly marketable brand there, despite iPhones being available in India since 2008. IDC’s look at the Indian smartphone market for the three-month stretch ending in September did not even register Apple among the top five smartphone vendors in the country. Those names are, from highest to lowest, Xiaomi (OTC: XIACF), Samsung (OTC: SSNLF), Vivo, realme and OPPO. Those companies collectively accounted for 90% of third quarter smartphone sales in India, reflecting their aggregate market share from the same quarter last year.
While it is difficult to pinpoint Apple’s current share of the Indian smartphone market, some put it in the order of 2% of the country’s total. This remarkably low interest from Indian consumers is telling.
Premium pricing is the problem
Those who have followed the story will point out that Apple has not exactly been competing on a level playing field in India. In other words, foreign consumer technology companies like Apple have not been able to open stores dedicated exclusively to the sale of their own hardware. By law, a foreign company had to offer competing hardware. Apple decided not to build a retail presence at all instead of opening the door to lower-cost competing products. However, this law has since been repealed, allowing the company to start planning its first store in India next year.
Meanwhile, fans tout the fact that, at least within India’s premium portion of its smartphone market, Apple is as competitive as rivals like the aforementioned Samsung, Vivo, and a manufacturer called OnePlus. Canalys’ research suggests that Apple’s smartphone sales grew at a double-digit rate during the third quarter, driven by the opening of an online Apple store targeting Indian consumers.
However, in absolute terms, it means little. Apple still only delivered fewer than 800,000 iPhones to India last quarter, or about 2% of all iPhones IDC says Apple delivered during this time.
Nor is the high-end fringe of the market likely to develop suddenly anytime soon. IDC notes that the median sale price of smartphones in India last quarter was just $ 156, with more than 80% of shoppers spending less than $ 200 on their devices, reflecting the prior year’s figures when the global economy was in much better condition. IDC Research Associate Manager Upasana Joshi added to the report that he “expects the low- and mid-range segment to continue to be the volume driver,” with “affordable 5G upgrades and offers in the $ 200- $ segment. 500 … boost growth. “
At the moment, Apple’s iPhones in India are priced above $ 500. Therein lies the problem for a cost-conscious market.
Bottom line
Never say Never. Apple is now assembling the lower-cost iPhone SE in India, potentially opening the door to a lower-priced offering in the country. You’re just not chosen to make that lower-priced offer, at least not yet. Until the company starts making price concessions that are simply not like Apple’s, India will not be a huge driver of hardware growth.
Or, as Canalys research director Rushabh Doshi arguably underestimated, “Apple’s pricing strategy for its new iPhones in India needs serious consideration.”
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