Mint Explainer: What has changed for Apple in India?

How did India go from an insignificant country for Apple to one that is becoming increasingly important to the company? Mint explains:

What has Tim Cook been saying about India?

Apple’s chief executive called out India as an ‘extraordinary’ market in last week’s earnings call, in which he talked about the market achieving double-digit revenue growth and record-breaking numbers. 

“We see an extraordinary market—a lot of people moving into the middle class, distribution is getting better, lots of positives. We put two retail stores there—they're doing better than we anticipated. It's still early going, but they're off to a good start, and I couldn't be happier with how things are going at the moment." 

Cook was in the country earlier this year to launch India’s first Apple stores, fully owned and operated by the tech giant. “It's an incredibly exciting market for us and a major focus of ours. We have low share in a large market, and so it would seem there's a lot of headroom there," he said. 

This is remarkably different from his views about the market in the past. Take for instance in 2012, when he said in an earnings call a year after taking over as CEO, "I love India, but I believe Apple has some higher potential in the intermediate term in some other countries." At that time, the iPhone maker’s entire focus was on the China market.

Why has this view changed?

Apple has seen the change in the Indian market buying trends, with more consumers taking to iPhones. Eight to nine million units are expected to be bought in India this year from just one million back in 2013. Apple's market share has increased from 1-1.5% to about 6% in 2023 and is expected to rise further. Revenues from India are expected to hit $10 billion this year, 10 times its what they were in 2015. 

On the other hand, Apple has been facing consistent headwinds in China and seeing its market share eaten into by homegrown brands. Higher labour costs compared to a decade ago are a concern as well, even as the market provides massive economies of scale.

How has the Indian smartphone market changed?

The Indian smartphone market has evolved in many ways. One, the average sale prices of smartphones has risen by about 30% since 2021. The average sale price as of September 2023 hit an all-time high of $253 or ₹21,000, IDC India said in its latest report on Tuesday. The average sale price was ₹12,000 in 2017.

Two, India’s per-capita income has risen. In 2008, when iPhones were introduced in India, per-capita income was a little over $3,500. By 2021 it was over $7,000, said market watchers. India’s highly aspirational middle class has swelled too, from 17-18% of the population during 2008-2010 to over 30% today, according to analysts at TechArc.

Why is India critical for Apple’s future?

The answer to this lies in the issues Apple and other companies that rely on global supply chains faced when China adopted its zero-covid policy, halting the flow of practically all goods in and out from the country. Apple’s largest contract manufacturer Foxconn saw its huge facilities shut down, stalling production of the latest iPhone. 

Companies including Apple have since been diverting some of their manufacturing or assemblies to other countries, and India appears to have been a big beneficiary of this shift with its Make in India policy and incentive schemes for manufacturers. The country is also lowering duties on components to attract the supply-chain and vendor ecosystem. 

Apple's contract manufacturers have increased their focus on India as a manufacturing base. Foxconn, for instance, has been assembling the iPhone in India since 2018 and has been sourcing components such as chargers and battery packs locally.

Can India achieve the scale Apple needs for global production?

The country is home to over 850 million mobile phone users, and potential more than a billion in the next five years. Most of them are upgrading to their second or third smartphones and, as mobile-first consumers, are upgrading to better and more expensive smartphones. This represents a significant opportunity for Apple outside the US and China in the coming years, according to analysts at Counterpoint. 

On the manufacturing side, India’s policies are attracting global players such as Foxconn, Pegatron and Wistron. Local players are also joining the fray, with Tata Group having taken over Wistron’s manufacturing facility. States are offering incentives on top of those provided by the union government. 

Mint reported earlier this year that Apple's contract manufacturers planned to nearly triple the scale of local production and bring in their supply-chain partners. India's position as a prime market for Apple was cemented further when the latest iPhone 15 was assembled here and made available to Indian buyers on the day of the global launch in September. The next step will be to make Pro iPhone models, followed by Air Pods, iPads and Macs.

What is Apple likely to do in India going forward?

The iPhone maker will aim to expand its base and try to get a 10% share of India's smartphone market with a low-cost model. “An iPhone SE at ₹35,000-40,000 could do the trick," said Navkendar Singh from IDC. “We anticipate an aggressive retail push, including new Apple flagship stores in major cities," said Prabhu Ram from CMR. “Beyond iPhones, we foresee Apple building on the strong growth tailwinds for its hardware portfolio. Lastly, Apple will also focus on growing the share of its services business – Apple TV+, Apple Fitness and Apple Music – in India."