India might be the gold mine every mobile-maker wants to tap, but the world’s most recallable smartphone brand is struggling to retain what traction it has here. The last two years have seen Apple and its iPhones put up a distinctly forgettable showing in India. This spells a looming crisis for the firm, which sells many times more units in the US and China. While industry forecasts foretell a contraction in China come 2019 and flat growth in the US, India is expected to continue growing.
But Apple has only seen Indian market share fall consistently over the last few years, even as the market itself grew. According to data shared by Counterpoint, iPhone commanded an overall smartphone market share of just one per cent in July-September, 2018 (2018 Q3) — a steep fall from the 3.1 per cent peak it achieved during October-December, 2016 (2016 Q4).
Its bread-and-butter premium segment share (Rs 30,000+) has fared even worse. From a height of 59 per cent in 2016 Q4, its share had dwindled to just 25 per cent in 2018 Q3. Recent reports from industry tracker IDC also show that Indian iPhone customers are beginning to switch over to brands like OnePlus, even though Apple still enjoys the highest brand loyalty, with 44 per cent of customers sticking with it.
Analysts say Apple’s problems in India span the spectrum, from poor marketing strategy to distribution, but its Achilles heel remains pricing. The cheapest of 2018’s iPhones — the XR & XS — cost more than Rs 70,000 in India, a far cry from some competitors. “Pricing them beyond the reach of premium consumers in India doesn’t help,” notes Neil Shah of Counterpoint. Word of mouth publicity for brands like OnePlus also gives them a boost, according to IDC’s Upasana Joshi.
Apple’s pricing woes come primarily from high import duties it has to pay and its inability to manufacture locally. Apple only makes a limited number of iPhones in India and imports upwards of 70 per cent, raising prices to exhorbitant levels. For instance, while the XR retails at upwards of Rs 75,000 in India, it costs just around Rs 55,000 in the US.
This is a major problem for the brand, because while it sells around 35 times more iPhones in China and US than India every quarter now, it could miss the bus to future sales. “India (will become) strategically important maybe five years later when it will have potentially tens of millions of premium users buying premium smartphones… So Apple, is in a catch-22 situation whether to design iPhones which will cater to current Indian users or wait for the next five years, by when most users might not even switch from Android ecosystem,” notes Shah.
Prabhu, Apple top brass to meet
India’s commerce and industry minister Suresh Prabhu is set to meet the top leadership of US-based iPhone maker Apple in Davos next month to discuss their plans to set up manufacturing facilities in India. “We are still talking to Apple. Negotiations are ongoing. If they agree, we will like them to set up offices in India as well. I am meeting Apple’s top leadership in Davos in early January,” he said.