Due to the impeding US-China trade war, and the fact that India is set to overtake China as the world’s most populous country very soon, it comes as no surprise that Apple is interested in pushing manufacturing towards India. The country has a large and loyal customer base, but the exorbitant increase in prices (iPhones in particular) make it very difficult for even the world’s most valuable company to establish a strong presence in the country. Apple doesn’t have any retail presence in the country, due to regulations that prevent companies from having a single-brand retail presence, unless 30% of the parts were locally sourced. Relying on certifying 3rd party sellers, and online stores to sell their products forces them to resort to higher prices to maintain their margin. It also doesn’t help that iPhones are taxed an import duty of 12.0% centrally, again taxed an average12.5% by state (tax amount varies by state), and also taxed separately for the accessories in the box!
The average Indian, earning about 3% of an average American annually, cannot afford to pay 1.5x for the same phone! Still, it is surprising that Apple maintains a 1.2% market share in such a low economy country. Samsung, however, has a 29.7% market share in India, and this is because of a very smart strategy. By selling very low budget but feature-rich phones, that are manufactured in the country, avoiding any import duties. Samsung’s newest phones: the Galaxy M10, and Galaxy M20, start at 130 USD and 155 USD respectively. Advertising these phones with the latest of phone trends, like large batteries, dual cameras, and edge to edge “notch” displays, combined with mass celebrity advertising, they easily appeal to the average Indian and seem severely underpriced. Even the premium smartphones such as the Galaxy Note 9 are priced much lower, at 815 USD in India, compared to the U.S price of 999 USD. This is quite opposite to Apple, as their 999 USD iPhone XS sells at certified retailers for costs as much as 1400 USD in India. It is no surprise how other companies are able to sell a much higher number of premium and budget smartphones, compared to Apple.
Apple has already begun working on changing its strategy for India. They already have assembled lower-priced SE and 6S models in India, through Wistron Corp’s local unit, in Bangalore. Foxconn is already going to invest 356 million USD as early as 2019, to expand their plant in Sriperumbudur, where they already produce phones for Xiaomi Corp. “The investment may create as many as 25,000 jobs”, as told by Tamil Nadu’s (an Indian state) Industries Minister M.C. Sampath. This plant could potentially be used to produce the older iPhone X model in India, as it is rumored to be the ideal phone to start production with, as a feature-rich and low-cost phone. This could also be due to the fact that Apple’s contract with Samsung requires them to produce a minimum number of OLED panels for the iPhone X, a number that they haven’t fulfilled yet. This could lead to a great boost in sales, and finally a good business move by Apple, taking advantage of all the “Make in India” incentives hosted by the Indian government. Apple will be killing two birds with one stone, by hedging the risk of any new US-China trade policies and widening their market share in a fast developing economy, where many companies such as Samsung, Xiaomi, Huawei, Oppo, and Vivo already are taking advantage over. Soon we might see the day where the iPhone becomes a common product for the average Indian.
(Cover Image Credits: GST Station)