Amid Slowdown, Apple Posted Back To Back Record Quarters In India

As Apple reported its first- ever quarter of negative growth after 35 quarters, India was one of the few bright spots during the quarter as it posted back to back record quarters of sales in India. Though the YoY growth is significant but the numbers shows that Apple still has a lot to catch up before making India as a significant contributor to its overall volume. To correlate, there are few countries in the world which are almost 5% of the total population of India but still managing to contribute more to overall iPhones sales than India. Couple of points below to summarize Apple’s recent performance in India.

  • With smartphone user base of 220 million and smartphone penetration of the total potential population below 30%, India offers a huge opportunity for any smartphone brand and the same is true for Apple.
  • However, unlike USA and China, India has been a highly price-conscious market with almost 70% of the smartphone sales being below $150.
  • As a result, Apple’s higher priced iPhone portfolio has limited Apple’s opportunity to grow at the same pace as the market. Hence it is realigning its strategy in India to capture young highly aspirational audience through discounting previous flagships or by selling pre-owned iPhones in India.
  • With apple ecosystem being robust than ever there is potentially a higher chance that as these young consumers become more mature smartphone users there is a much higher probability for Apple to upgrade them in near future

“Hence Apple’s strategy in India is to sell more phones and not necessarily new phones”

  • Apple grew 61% YoY in terms of sell-in in India, a new Q1 record for Apple in India. Although Apple’s YoY growth in India was significant but the growth came on a much lower base of iPhones as compared to other countries like USA and China.
  • With India’s average contribution to overall iPhone sales and revenue at 1% it is unlikely that India will offset the global decline for iPhones in short term.
  • Most of the growth was driven iPhone 5S which contributed to almost half of the total sales during the same period.
  • During Q1 2015, iPhone 5S and 4S contributed to almost 33% of the total sales. This signals tough time for overly priced and smaller screen size iPhone SE to make significant impact.
  • As a result the overall ASP declined by  35% YoY.
  • Apple will have to be patient and keep investing in expanding its distribution reach beyond metros where there is still sizeable target audience that having buying power to be Apple’s prospective end users.
  • Wider distribution will ensure first time buyers, a priority for Apple in India as compared to the upgrades.
  • Not only Apple has to reach out to these users but also educate them about its products and services.

To conclude, we believe that Apple still has its work cut out to stimulate sales of its flagships. The Indian smartphone user is not as rich or mature as Chinese smartphone user and it will take at least 4 years for iPhone to see sizeable mature smartphone base to upgrade in volumes to higher priced iPhones to drive the halo effect. But four years is a long period in this industry, and Apple will have to be patient and cautious to make India as its next growth engine like China.