Tim Cook, chief executive officer at Apple Inc., is on his first official visit to India. It comes at a crucial time when the Cupertino, California-based firm is focusing on new growth markets such as India after posting its first-ever decline in iPhone sales in the first quarter of 2016. Apple’s chief spoke to NDTV’s Vikram Chandra in an exclusive interview. Edited excerpts:
How have you been enjoying your discovery of India?
You know I came here to learn about the people and the culture and how business is done and what people are interested in and their hopes and aspirations. I’m leaving with more knowledge, with all of those and there’s still so much to learn, but the thing that has hit me the most is the warmth of the people. I instantly felt like I belong here and was a part of the community and that is so uniquely India.
You have experienced some of India’s key religions; you went to a temple; you met Bollywood and you went to a cricket match.
Do you by now know the difference between deep fine leg and deep square leg?
I’m not sure I know it all but I found it to be unbelievably exciting, watching the game. You can feel so much energy there, so much enthusiasm. I loved it and I’m totally hooked on to it.
It wasn’t necessarily the most exciting match, the one that you saw.
But it was for me and with the crowd being into it so much, it was something really special.
You still have some time and you are going to be meeting Prime Minister Narendra Modi. What were the key items on your agenda?
I wanted to understand from our point of view. I wanted to understand the infrastructure and the role of 4G. We think this is really critical to the progress of the country and it’s also critical in terms of bringing out the life of the iPhone and really doing things you couldn’t do before. And I’m leaving very encouraged with what I’ve heard. I think there is going to be a massive change in the usefulness of the cellular networks over the next several months and across the years, so this is the one key thing I’ve gotten.
So when you’re talking to the telecom operators as you are, are you really asking them about rolling out LTE (long-term evolution) faster or are you perhaps even telling them about selling Apple products?
Yes, I’m doing both. It’s the truth. As you know, it’s difficult for an operator here to sell the product because of the tax structure. So usually it’s the retailer that does that. And so the conversations are primarily around the service and the rollout of 4G. But we’ve had some interesting discussions about a number of different alternatives.
And when you are talking to the government here, is it about the refurbished iPhones, or Apple stores, or both?
You know, we have taken a step back on India and are looking at India holistically. And number one what we see here is talent. The talent of the Indian people is unbelievable. And for us that means getting the developer community moving on iOS. We are also utilizing a lot of skills in India for maps. We are also looking at India from a number of other points of view like Apple retail, we see a future for Apple retail in India. We are not just looking at one area but expanding it. I found the government to be really receptive on the issue that you are raising. It’s like a new phone because it has a warranty and yes we would like to do it here. We do it in the US, we do it in Japan, we do it in many different parts of the world.
Maybe one way of getting that is to suggest to the government that maybe a pre-owned laptop or computer can be used for underprivileged children, supply it to schools, as Apple did once in the US.
Yes and, as you know, we are doing some of that in India as well and I think anything that gets more of Apple technology accessible for more people is really good for the country.
The Apple store question I will ask in more detail later, but is that more or less a done deal now that you will be able to get Apple stores into the country?
It’s not a done deal yet, we have applied for the right to do that and we’re working closely with the government and I’m really optimistic about it. But we have not been given the green light yet.
The investment that people keep wondering about, are you going to be coming here and making big investments in anything, investing in companies, setting up factories like you’ve done in China in the past? Is that something that is still being thought of?
Well, we’re really doing that and so as a part of this trip, the maps facility will be several hundred million dollars of work and of course, the investment in the accelerator for cellphone apps is a major investment. So all of these things add up to a significant amount of economic activity.
The key premise of Apple products anywhere in the world is the user interface. That’s what you build the entire company on. You should be able to pick up a device and that should have a magical interface. In India, it doesn’t always work. If you were to take out a brand new iPhone and if you were to see the icons on the home screen, many of them may not necessarily work, either because of poor signal or because things like iBooks don’t work in India, Apple Pay doesn’t work in India, Passport wouldn’t work. How would you solve that problem?
There’s a story behind each one of those and so let me try and answer in detail. So in terms of the signal quality, I do truly believe after spending a week here that you are going to see a significant 4G coverage and I think that many people who today can’t do simple things like watching a video on their phone, they will be able to do that in the next several months. I believe there is going to be a massive improvement there. In terms of Apple Pay, looking at what to do there, we want to bring Apple Pay to India. We’ve met some of the banks to understand their perspective on mobile payment and I think there is an interesting opportunity there and I’m very encouraged with what I have heard. So we want to bring every service that we do to India. Every one. And also we want to deeply understand the market here and if there is something unique that’s needed, we also want to do that and so we are about making the best products in the world that enrich people’s lives and we are not going to rest until we do that.
So I guess the question that follows is that if you do want to control the user experience from end to end, and that’s been Apple’s philosophy, do you think it’s time Apple started to look at India from a slightly strategic point of view, to try and figure out what are the specific products that might actually work in India and you actually might have products that are designed for India? This is, after all, your key market.
Yes and that’s a part of what we are doing. We are taking a step back and evaluating everything that we do relative to India. And you can probably see that we are looking at India from a government point of view and what the government is interested in. We are looking at it from a cultural point of view. We are looking at media and how people are consuming media and entertainment. We are looking at different services that people use. We are looking at 4G. We are looking at how we can tap into the huge technical talent that’s here.
How big are your India plans, because the China story isn’t necessarily going well?
It has nothing to do with China.
But you are slowing in China...
We slowed last quarter and so let’s put it in some context. Last year, Apple did $59 billion worth of business in China and this a big number for a company to do. But India, India is different than China. India is a different place and we are going into India very humbly. We’ve been selling here for a while as you know, but we are taking a step back in viewing India strategically and I do believe that with the reforms that are going in India, it means that India has an enormously bright future and we would like to be a part of that and we plan to be.
So what would your top 4-5 priorities be for Apple in the next decade? Would India be one of them?
Yes, absolutely. We are putting in enormous energy here and we are not here for a quarter or two quarters or the next quarter or the next year. We are here for a thousand years and so we’re not about making the most. We’re about making the best. So a combination of thinking for the long term and never lowering the bar, those are the things we are about.
I was perhaps one of the first people who brought back a Mac to the country when I came back from Stanford in 1991 and I can’t tell you what a struggle it was, because for Apple India didn’t exist and in India, if you had a Mac, people wouldn’t know what it was for. So India was a black hole for Apple. Then Apple started to say yes, India is important, but from a sales and marketing point of view. Does your visit signal a shift—that it is not just about sales and marketing anymore?
Yes, absolutely. At least from my point of view, we haven’t just viewed India for sales and marketing before, but we are clearly taking a step back. We are clearly viewing India as much more strategic. We are looking at it through a global lens and everything that we can do with India that may also serve the rest of the world. I’m so optimistic with the conversations I have had with the people I have met
Let’s just look at sales and marketing. Many of the companies that have been particularly successful in India have always Indianized themselves. They have almost become Indian companies. If you go out and ask people about Samsung, LG and Bata, they’ll say these are all Indian companies. If you look at Amazon’s ads, they are saying “We Indians”. But Apple’s ads in India, you’ve got a muppet cooking chocolate chip cookies...
The cookie monster.
The cookie monster is wonderful, but the question is does that really have an affinity with India? Do you need to Indianize to a greater extent?
We have to thoroughly understand the market. But I don’t believe personally in trying to be someone you are not and I think we are what we are. We are a California company and it’s important for us to be a California company in India or in France or in China, in the US or the southern part of the US. But that doesn’t mean not understanding and not listening to the local market and so we want to provide the best products in India for the Indian consumers and that clearly means having a deep knowledge and communicating in a way that makes sense; and perhaps the cookie monster is not the best example of that
Your ecosystem in India is not as great as it could be and should be and so discoverability becomes a big problem for somebody who is not familiar with the device...
Yes, I realized that and that will change. Whether you look at Apple music, adding more local music or you think about Apple Pay, we want it to be here and we want it to be important in the country.
The problem is, when you are trying to sell an iPhone in India and somebody picks up that phone, it’s expensive even in dollar terms. Then because you have taxes in India and you don’t necessarily have all of the functionality that you would in the US. So you have got an iPhone here which is more expensive than it is in the US, with less functionality than it would in the US. In a country where purchasing power is a fraction of what it is in the US, that sets up a problem for you.
The challenge is that the duties and the taxes and a sort of compounding of those makes the price very high. Our profitability is less in India, materially less, but still I recognize the prices are high. We want to do things to lower that over time to the degree that we can, and so we’re looking at a number of different things. What we wouldn’t do is lower our quality bar. And so we are only going to make a product that we think is a great product, and that means we aren’t going to compete in some of the other price bands and I don’t think that’s what people want from Apple though.
Yes, you could either make that user experience perfect or compete on prices. And the problem with competing on prices is, of course, that your profit margins begin to erode further. And that must be what a lot of people are asking you: could you ever come in and compete with Android phones at the Rs.12,000 and Rs.15,000 price band?
Again, we’re about making the best and that means we’re not going to play in some of these other price points. We would never make a product that we’re not proud of. And so I would not want to be in those markets. I don’t have the desire to be in those. What I want is, I want the consumer in India to be able to buy at a price that looks like the US price. That would be my objective and I want the user experience to have all the services,
So is it possible, and I’m going to put you on the spot right here, is it possible that one year, two years from now you could be back in India, up on a stage and saying “and one more thing, here is an India phone, here is a product that is designed for a country like India, at a price point that works for India, with a user experience baked into it which is as good as anybody would be able to experience”? Is that something that you would ever consider?
We never talk about the future, as you know, we just don’t get into it. But conceptually what we found around the world is that there are lots of people around the world that do want the best product. And so we haven’t found a great need to change the hardware, we have found a great need to understand the services that people are using and make sure those are integrated in a different way. And I think we can do a much better job in India on that.
If Apple wants India to drive growth, there are two Indias; there’s a certain section of slightly affluent people, more westernized, English speaking, you’re probably already saturated in that market. It’s not materially different to Apple’s penetration elsewhere. Your big opportunity and the billion-persons opportunity is in those other four hundred million, which is a different market.
I want to serve both groups, and all the other groups, better. And again, best products to people that enrich their lives, that’s what we’re about regardless of which kind of segment they are in.
Back in 2000 when you were first coming up with Apple stores, your whole point was that I shouldn’t have Macs sitting on a table between two PCs and an uninformed clerk trying to compare them on their specifications. Actually in India right now you ought to go a hundred yards from here, that’s probably what you would find. The Apple store is probably important for you.
It is, but it’s not the only way that we will go to market, because India is a huge country and you want to be around where people are. So we’ll have a multi-channel kind of approach, we’ll have our APRs or authorized premium resellers, and these are very nice, mono-branded and they have been trained by Apple. They have a look and feel that we spent a lot of time on. I just went into one this morning and I was very happy with what I saw there. And then we’ll be in other shops too, but we’re placing increasing emphasis on training and making sure that people that are in the different channel spots really understand what our products will do.
Do you think that you perhaps might need more evangelizers in India as you did when you were starting off with the Mac and other things, because sometimes in India that realization isn’t completely there? I’ve had people come up to me frequently and say “you can’t really use a Mac in an office space”. Actually you can, but you need to have somebody getting that message across.
Yes, I think just communicating very clearly and very often and very frequently and then an understanding why people have those perceptions. And there’s nothing like having customers that are using your product telling their neighbours that “hey you should own a Mac or you should own an iPhone or an iPad”. That is the best marketing, word of mouth, that you can never get and it’s free in a way, but it’s the most authentic kind of marketing.
A question that people keep asking is about servicing. How do we get our products serviced? In the US it’s so simple. If your iPhone isn’t working you walk into an Apple store, you say this doesn’t work, they take it away and they give you a new phone. It’s as simple as that. In India you will struggle.
Today we use an authorized service provider kind of approach in India and you can bet that we’re working on continuing to improve that, so that it’s very clear and very simple to get your product serviced, or get your questions answered.
The other question is regarding expensive accessories...
I noticed some of that this morning. I noticed that the selection of accessories wasn’t robust. We want to make sure that we’re providing those for people that want them. So it’s clear we need to up our game there.
On the question of ‘Make in India’, which I assure you the Prime Minister is going to be talking to you about at great length, when are you putting up factories here? What would be some of the things you’ll be thinking about?
We’re looking at what we can do here. We’re definitely thinking about it. We’re working right now on the certified pre-owned area. And that would provide a level of manufacturing because you bring those products back to a new level. And honestly we would look at expanding that as well.
If I could just understand that a bit better. Are you saying that that process would happen in India? Pre-owned phones can be certified?
Yes, we want to do that here.