Apple Q3 2018 results: Why iPhone X isn’t a hit in India like elsewhere
India, the sole shining star for Apple, found no mention for its iPhone sales chart in third quarter of 2018.
Until last quarter, CEO Tim Cook was bullish on India and said the company was putting "great energy there." Describing the country as a "huge market", Cook banked on the increasing number of people moving into the middle class.
"Let me start with India, and then I'll talk more about China. In India, we set a new first-half record. So we continue to put great energy there... Our objective over time is to go in there with all of our different initiatives from retail and everything else. And so we're working toward those things. It's a huge market and it's clear that many people will be moving into the middle class over time as we've seen in other countries," he had said during the earnings call for the second quarter of 2018.
The only India mention in the latest earnings call was with regard to Mac (Apple's PCs) sales. "Even with a difficult launch comparison, we saw great momentum in many emerging markets, with growth well into double digits. We have established new June quarter records for Mac sales in India, Turkey, Chile and Central and Eastern Europe," the company said.
So what really happened to Apple's fairy tale in India?
Apple rode high on continued strong sales of iPhone, services and wearables to post a record-setting quarter. Its $999 iPhone X was the quarter's best seller.
But industry experts in India suggest that 2018 hasn't been a great year for Apple thus far.
Faisal Kawoosa, a senior analyst at CyberMedia Research, recently pointed out that Apple shipped just one million units into India in the first half of 2018. By comparison, the company had shipped more than 3.1 million iPhones into the country during the same period last year, according to CMR's India Monthly Mobile Handset Report.
"There are three segments that could potentially buy an iPhone in India.The first is a technologically-evolved segment. They are well aware of the product and the brand and capable of making the decision on their own. The second segment comprises those who can afford, and want, the iPhone only because it has a premium tag. Whether or not they understand the iPhone, they would still keep on upgrading to the latest," he wrote.
"There is yet another segment, which Apple is not looking at in any significant way. This segment is of potential buyers who have the pockets to buy the iPhone, but do not understand Apple as a brand and the iPhone as a product. For them, it is just another brand and eventually they buy something comparing features and specifications."
Steep pricing and customs duty
Parv Sharma, an analyst at Counterpoint Research, pointed out that one of the primary reasons behind Apple's snail-paced growth in India is due to the company's inability to bring down iPhone prices. For instance, its flagship iPhone X hovers around ₹1 lakh, compelling buyers to either settle for lower-end or older iPhone models. He also suggested that new rivals like OnePlus may have dented Apple's market.
"Apple iPhone X costs around ₹1 lakh. The company failed to bring down the price of its phones due to the increase in customs duty by the government. This has hurt Apple as it couldn't roll out the seasonal price drop for its key phones. Also, companies like OnePlus have gained popularity in India," he said.
It may be recalled that Apple had to revise prices of iPhones in India after the government raised customs duty on imported smartphones to 20% in a bid to push local manufacturing. Apple currently manufactures or locally assembles only two models - the iPhone SE and iPhone 6S - both older models.
Parv suggests that Apple can turn around things by locally assembling its iPhones.
"Apple's share in the premium segment reached its lowest ever 14% in 2018Q2 due to decline in shipments for its iPhone 8 and X series. Additionally, the increase in import duty and absence of local manufacturing impacted its pricing strategy in India. Apple is also looking to streamline its channel structure in India. Most of the bestselling iPhones in 2018Q2 were mostly from the older generations," he added.
India's premium market: Dawn of OnePlus
Let's look at the Indian premium smartphone market. The over-₹30,000 phone market is dominated by the likes of Samsung and now OnePlus. In fact, OnePlus 6 has become the top-selling premium phone in India.
"OnePlus was also the fastest growing brand in the premium segment (+446%) while shipments for Apple and Samsung declined YoY," said the recent Counterpoint Research report.
"OnePlus is now increasing its points of sale by launching its offline and exclusive stores across key cities. This will enable the brand to reach out to a larger user base going forward, as the premium segment market is estimated to grow faster than the overall smartphone market in India for CY 2018 and beyond."
The report says Apple's share reached its lowest due to decline in shipments of its iPhone 8 and iPhone X models.
"Apple had a slow quarter in India, the third largest smartphone market globally. It underwent changes in its distribution strategy. Apart from this, its domestic assembling is yet to pick-up pace, which means the company is still relying on imports for its sales in India. Apple had 1% market share during the quarter, its lowest in recent history," said a separate report.