While the government’s step is incrementally positive for the company, it may not result in an immediate strategic shift from Apple's side.
With relaxed local sourcing norms and easier rules for online selling, India has laid out a red carpet to attract Apple to the world’s second largest smartphone market where the California-based company enjoys a miniscule but growing user base, but this will not be a game-changer for the premium phonemaker given that 95 percent of all handsets sold in this price-sensitive market are entry-level budget devices.
While the government’s step is incrementally positive for the company and would strengthen Apple’s overall perception of India as an investment destination, it may not result in an immediate strategic shift from the company’s side in the market where other brands like OnePlus have managed to capture a more significant share of the premium smartphone pie.
“We love our customers in India and we’re eager to serve them online and in-store with the same experience and care that Apple customers around the world enjoy. We appreciate the support and hard work by Prime Minister Modi and his team to make this possible and we look forward to one day welcoming customers to India’s first Apple retail store. It will take us some time to get our plans underway and we’ll have more to announce at a future date,” Apple said in a statement on August 29.
This comes a day after the government relaxed norms that earlier required companies to source 30 percent of their production locally to now include exports as part of the requirement. It has now also allowed foreign single brand retailers to set up online stores before physical shops provided the brick-and-mortar stores come up in two years from the date it starts selling through its online stores.
The new rules also mean that in the near term India could be home to Apple’s iconic physical stores, which are immensely popular in the West, and where consumers also often end up exploring its other product and services portfolio.
“Apple is a platinum standard brand and its brick-and-mortar stores are its monuments. The moment a country gets an Apple store it certifies a degree of permanence. An Apple store is like a Taj Mahal and once it opens, that country has arrived on the company’s global map,” brand expert Harish Bijoor said.
An increase in iPhone user base here would also directly enhance the appeal of the company’s other products and services thanks to a consumer friendly and sticky iOS ecosystem. In fact, over time the country’s start-up ecosystem could also get a boost given Apple’s push towards mixed reality and augmented reality solutions.
“Given the souring of US-China relations, Apple is looking to reduce exposure to China and while India may seem like the next investment destination, it would take time to develop a strong production ecosystem here similar to what China already offers. There is also huge competition from Vietnam to attract Apple. But India’s recent measures have come at the right time,” Tarun Pathak, associate director at Counterpoint Research, said.
Apple, which was in the past gloriously indifferent to India, in the last quarter changed its pricing strategy in this market which is dominated by Chinese budget brands such as Xiaomi, Vivo and OPPO. For the first time in its history, Apple went against the grain and decided to opt for price cuts for its flagship model iPhone XR. With this, India bounced back to growth in the June quarter at a time when the company sold fewer iPhones globally compared with the previous year.Despite a growing user base, Apple, with 20 percent share of the premium market, still lags behind Chinese smartphone maker OnePlus which captured its highest-ever shipment share of 43 percent in the June quarter and is the leader in the segment followed by Samsung with 22 percent share. The premium market is set to see even more competition with brands like Xiaomi and OPPO foraying in this segment.
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