India's per capita income lowest among countries with Apple Stores

India is getting its first set of Apple Stores — one each in financial nerve centre Mumbai and national capital Delhi — ahead of other emerging economies that have higher per capita incomes such as Malaysia ($28,150), South Africa ($14,340), Indonesia ($12,680), Vietnam ($11,080), the Philippines ($9,210) and others.

Per capita income of countries with Apple Stores

“For young Indians, the Apple iPhone is a status symbol. You might be working in a McDonald’s or studying in a college, but you still want to buy an iPhone as it lends you a lot of social capital. Mind you, this cohort usually buys the models that are two generations behind as those are cheaper,” said Neil Shah, Vice-President at market research firm Counterpoint.

Tapping into this aspirational pull of the brand, Apple is estimated to have shipped 6.7 million iPhones to the country in 2022, compared with 4.8 million in 2021 and 2.2 million in 2020.

The company has tied up with banks and e-commerce portals to service the demand for its products among low-earning youngsters by giving them credit on small equated monthly instalments. For example, an iPhone 12 model worth Rs 53,999 can be bought at an EMI of Rs 2,644 for 24 months on Amazon.

There are two major factors that are helping Apple shore up its presence in the Indian market. The first is a demographic that is fast shifting to more premium phone brands. With people spending a significant amount of time on smartphones, both for work and recreational activities like watching short videos, web series, playing online games and engaging on social media, they are ready to spend well on a premium device.

For this reason, Counterpoint estimated that the premium category of smartphones in India — models that cost above Rs 30,000 apiece — is growing at 11 percent annually. With its phones priced at over Rs 45,000, Apple is the leader of the pack in this category and accounted for more than a third of the 17 million premium smartphones shipped in the country last year. (A shipment is not a sale to the end consumer but a dispatch to a retailer.)

The second tailwind for Apple in the country is that both the central and state governments are laying out the red carpet to attract high-tech manufacturers to the country. If the Centre is offering subsidies of 4-6 percent to companies that set up production facilities for smartphones and electronics components, states are competing with each other by offering incentives on power consumption by manufacturers, lower taxes, interest subsidies or even easing labour laws.

These developments come at a time when Apple is betting on India to become a key global manufacturing hub as the company looks to diversify its manufacturing capabilities beyond China amid rising US-China tensions. The company currently manufactures iPhones in India, including the latest iPhone 14, through contract manufacturers such as Foxconn, Wistron, and Pegatron, with plans to expand into other products such as its wireless headphones AirPods.

The Cupertino-based tech giant has exported about $5-5.5 billion worth of iPhones from India in FY23, accounting for nearly half of the country's mobile phone exports, according to industry estimates.

Interestingly, China’s per capita income was $7,630 in PPP terms in 2008, the year Apple set up its first retail store in the country. Experts believe that the fact that India is at a similar per capita income level now, and remains one of the fastest-growing large economies amid a global slowdown, makes it an attractive market for global consumer brands to bet big on at this point in time.

“Just opening a store does not mean anything by itself because, fundamentally, the market structure has not changed much as far as the purchasing power of consumers is concerned. There's a lot of aspiration to buy, there's a lot of interest to buy, but not many can afford to buy an Apple product. That's the reality," said Ankur Bisen, senior partner at management consulting firm Technopak Advisors, adding, however, “The store openings signal a deeper commitment by Apple to the Indian market. It shows that the company wants to connect directly with customers rather than intermediaries like resellers. It is also a way of showing the Indian government how committed it is to the country.”

There is also a point of concern for smartphone makers like Apple and its South Korean counterpart Samsung. And it is not just the fact that the overall Indian smartphone market remained flat in terms of revenue or shipments declined 9 percent in 2022. It was most probably a blip year as consumers were waiting to see the rollout of 5G services and launch of compatible phone models, according to experts.

India's smartphone market at a glance

The bigger worry is that the pace of feature phone users transitioning to smartphones has slowed down. Shah of Counterpoint pointed out that a bulk of the 250 million feature phone users in the country are not buying new devices or upgrading to a smartphone as fast as in pre-Covid times.

“It seems to be an impact of the pandemic as a lot of lower-wage earners lost their livelihoods… That’s why the smartphone install base has only moved from 500 million to 620 million in the last three years (a compound annual growth rate of 7.43 percent),” he said.

This factor also played out in the festive sales of e-commerce companies like Amazon and Flipkart in the September-November period last year. Although mobile phones continued to contribute the biggest chunk of sales during the season, the category grew only 7 percent year-on-year.

“We saw fewer new smartphone launches this year during the festive season. While the number of shoppers who replaced their smartphones remained strong, the trajectory of new mobile shoppers has come down a bit,” Ujjwal Chaudhry, a partner at Redseer, told Moneycontrol at the time.

Former chief statistician Sen, who was quoted at the beginning of this article, is of the view that the slowing growth of smartphone adoption also reflects the low literacy among the poorest in the country.

“It should be fairly obvious, right? You need a certain degree of literacy to be able to use a smartphone. Otherwise, why the hell would you pay an extra Rs 10,000?” he asked.