Why declining iPhone sales is proof India is rejecting Apple's double speak
Arguably the biggest name in the tech world, Apple, recently became the first ever company to reach a market valuation of one trillion dollars. The Cupertino-based tech giant achieved this feat on the back of the growth of its iPhone business that despite registering a decline in sales in some crucial markets has managed to improve its revenues.
This paradox has been brought into effect by the rising average selling prices (ASP) – an all-time high of $796 – of iPhones last year. By breaching new barriers and selling its iPhones at exorbitant prices, Apple has managed to eke out more money from the pockets of its faithful.
Though great in the short term, the rising revenues have, however, glossed over the long-term impact of such a risky strategy which could force Apple out of the game in many of the world's most important markets.
India the first casualty?
The first – and possibly the biggest – casualty of this strategy appears to be India where Apple's iPhone business looks all set to see a massive decline of 25-30 per cent during the fourth quarter of 2018, also putting it on track to face a drop in year-on-year sales for the first time in four years.
What's more worrying however is that this comes despite Apple's efforts to tap into the festive frenzy during which it offered last year's iPhones at highly discounted prices over multiple e-commerce websites.
The projections, courtesy of CounterPoint Research's director of research, Neil Shah, paint a rather gloomy picture for the future of the iPhone business in India – a country which Apple claims to be focusing heavily on. Speaking to Reuters, Shah explained that CounterPoint's channel checks point to Apple selling 700,000 to 800,000 iPhone units in India – down from about a million a year ago.
“Sales are set to drop for the first time in four years,” Shah said. “If you look at Q3 - it was 900k last year and this (year) is almost 450k.
That percentage falls further when we look at CounterPoint's projections for the whole of 2018, with Apple expected to only sell 2 million phones – a drop of over a million iPhones from last year's 3.2 million devices it sold in 2017.
What's causing the fall in numbers?
As mentioned above, the major contributing factor behind the slowing iPhone sales in India is the increasing price of the premium phones in the country.
Even though iPhones have always been a premium offering meant for a select crowd, with the current price tags, even the select crowd that could afford the phones previously are now seeing themselves pushed out of a buying decision. From expensive, the iPhone lineup has now become prohibitively priced.
Case in point, the ridiculously priced iPhone Xs Max which starts at Rs 109,900 for the 64GB variant but goes up to Rs 1,44,900 for the highest model. The price is so high that it even makes Samsung's most expensive phone, Note 9, seem like an affordable option as it can be purchased for as low as Rs 67,999 on e-commerce portals right now.
However, the exorbitant prices of the iPhones are only a symptom of the larger problem that afflicts Apple's iPhones business in India. A problem that is more of its making and appears to be of design.
Is Apple really serious about India?
Despite Apple's CEO, Tim Cook, routinely expressing his thoughts on how important the Indian market is for Apple, the company, seems to be doing precious little to back his words.
Apple which currently enjoys only 2-3 per cent share in the world's second largest smartphone market has invested in terms of resources to increase this number. Even as Tim Cook continues to call India the next China for Apple until now we have seen little movement from the Cupertino-based tech giant to make this come true.
While the likes of Samsung and Xiaomi have setup multiple full fledged plants and are making the majority of their devices in India, Apple has continued to only make its cheaper phones like the iPhone SE and 6s in India. This has resulted in the cost of its latest phones to go up and up in the country.
Even the phones that it makes in India have not received substantial price cuts to make them viable entry-level iPhones for the Indian audience.
Taking aspirational Indians for a ride
Earlier last week, Tim Cook called the company’s problems in India “speed bumps along a very long journey”.
To us, however, this journey only appears to be one where Apple looks to be taking the aspirational Indian audience for a ride.
Proof of that is the disparity between Tim Cook's words and Apple's actions in India.
As it stands, the long-awaited "affordable" iPhone Xr is being sold in the country at a price of Rs 76,900 for the cheapest 64GB storage variant while the most expensive Apple smartphone in India – the iPhone Xs Max 512GB – would is selling for Rs 1,44,900.
An interesting thing to note here is that despite the disparity in incomes and purchasing power between India and the US, in terms of percentage, the most expensive iPhone in India is now over 42 per cent more dearer compared to last year's offering — while this particular jump in the US is far less steep at 26 per cent.
By making iPhones more and more expensive in India the company is exposing its true plans for India. Contrary to what it says, the company appears to be doing all in its power to keep iPhones out of the hands of the majority of Indians and sell it iPhones only to a select few – an ever-shrinking audience it wants to milk to the fullest.
If Apple is really serious about India it needs to take a step back and revisit not just its pricing strategy, but improve its overall investment in the country. Make not only its cheaper phones but increase capacity so that it can make its flagship devices too in the country.
Because it is only then that it will be able to price its phones right in India and prove that it is indeed taking the world's second largest smartphone market seriously. Else, it risks being rejected by a market of 1.3 billion people, one that could make or break its future.