The world’s richest technology company is in trouble. The US tech giant Apple might be making more revenue every year than India’s total tech exports but the company has seen better days. In April, the company reported that its bestselling iPhone’s sales had declined for the first time in history – after 51 straight quarters of uninterrupted growth in sales. And the company has already predicted another quarter of decline in sales.
To put things in perspective – 70% of Apple’s revenues come from iPhone sales, as testified by people queuing up outside stores for days to buy the newest models. And for their growth, Apple needs more Indians to buy their phones. But, it’s hard to sell a $600 iPhone in a market where the price of an average smartphone is less than $150.
Which is why Apple has been trying to woo both Indian buyers as well as the government to allow it to sell refurbished phones in the country – something that will bring down the prices of its devices. To further express their commitment to India, the company’s CEO Tim Cook recently came calling with a vision to invest in stores and tech hubs and said that the company is in India for the “next thousand years”.
While the government recently rejected Apple’s proposal to import and sell refurbished phones in the country, the authorities might finally warm up to the tech giant on at least one count – local sourcing. The regulations currently require foreign companies setting up stores in the country to source at least a part of their raw material from local sources.
But the government is considering relaxing the requirement for the iPhone manufacturer for at least 2-3 years, according to a report in the Times of India. While the finance minister has already said that the authorities would be willing to open the market to the company only if it creates some jobs, reports say that Apple had earlier told the Department of Industrial Promotion and Policy that it would like the sourcing requirements to go completely.
The big opportunity
However, the company may have to bend a bit if it plans to grow, as its markets saturate across the world. The latest data from the company’s filings shows that the company’s overall sales dipped across devices – not just iPhones – in the quarter ended March 31, 2016 as compared to the previous quarter.
In its financial filings, the company said that it sold 32% fewer iPhones in the latest quarter while iPads sales dipped by 36%. Compare this with the company’s growth in India where its sales jumped by a stellar 61% year-on-year in the last financial year. However, India contributes just 1% to Apple’s overall sales and revenue.
This is the big opportunity that Apples has missed out on so far. The company recently started filing results with its performance in China separated out from the broad category of the category for the Rest of Asia and Pacific. That’s because the company is now making a humongous one-fourth of its revenues from Greater China – the region including mainland China, Macau, Hong Kong and Taiwan among others.
In the second quarter of the American financial year 2016, the Greater China region contributed 24.7% of Apple’s revenues.
The rest of Asia and Pacific, in contrast, contributed only 6.2%. This is the big missed opportunity that Apple would like to capitalise on. In India, the smartphone maker is selling a large number of iPhones but its reach is tiny and limited to high net-worth individuals or in the used-phones markets.
Evidently because an Indian will have to work for more than 330 hours on average to be able to afford an Apple phone while the same person would only have to work 20 hours in Zurich, according to a purchasing power study. This makes India one of the most expensive places to buy an iPhone.
And this unaffordability is partly what prompted Apple to start selling refurbished phones – a move that could lower the entry point into its ecosystem and propel first time users to upgrade to a new device later on. However, as of now, Apple is nowhere to be seen in the Indian smartphone market.
The company has a market share of just about 3% by the number of devices shipped in the latest quarter, according to data by the research firm Counterpoint. Meanwhile, Samsung is leading the market with 29% share, followed by the home-grown phone maker Micromax at 17%.
While many say that India is a blind spot that Apple completely missed, Tim Cook also seems to have realised that it will take lot more than just launching devices on the same day as rest of the world to woo Indian consumers.
“The truth is that everyone wants the best product, not everyone may be able to grab it, but they want it,” he told the Hindu during a media interaction on his visit last month. “We are focussed on best, not most. So it doesn’t bother me that we don’t have top market share. I don’t have the goal to have the top share next week or next quarter," he said.
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