Bullish on the In­dian mid­dle class

Tim Cook un­der­stands the po­ten­tial of In­dian mar­ket as he re­mains op­ti­mistic about Ap­ple’s pres­ence in its fast-grow­ing smart­phone base

Millennium Post - - In Focus - NIS­HANT ARORA

Break­ing his si­lence on Ap­ple’s In­dia pres­ence, CEO Tim Cook ad­mit­ted last week that his busi­ness was flat in the coun­try in the fourth quar­ter amid weak cur­rency trends. Cook, how­ever, stressed he is still a big be­liever in the In­dian mid­dle class.

Es­sen­tially price-con­scious, In­dia, with 450 mil­lion users, is the fastest-grow­ing smart­phone mar­ket, just af­ter China and the US, and has the po­ten­tial to con­tinue grow­ing in dou­ble dig­its in the next cou­ple of years.

Ac­cord­ing to in­dus­try an­a­lysts, Cook is aware of the im­mense po­ten­tial in the coun­try and would fully uti

lise the as­pi­ra­tional value of the brand as sat­u­ra­tion sets in the rest of the smart­phone economies. That day ap­pears not too far when Ap­ple, with its deep pock­ets, will un­leash its en­er­gies as its own stores ar­rive and the com­pany starts man­u­fac­tur­ing new iphones lo­cally.

Cook’s op­ti­mism is un­der

lined by the fact that Ap­ple’s share in the premium seg­ment is dip­ping as new play­ers like China’s Oneplus ap­pear on the scene in a mar­ket where South Korea’s Sam­sung had reigned supreme. At third place, Ap­ple had a 25 per cent mar­ket share in the third quar­ter (end­ing Septem­ber 30) as it launched flag­ship iphones XS and XS Max in In­dia.

Ac­cord­ing to Coun­ter­point Re­search, the new de­vices are un­likely to off­set the high im­port duty ow­ing to the ab­sence of lo­cal man­u­fac­tur­ing as this made new iphones ex­pen­sive as com­pared to their pric­ing in other key coun­tries. “2018 is all set to be the first year for Ap­ple in In­dia when they will go through their first ever an­nual de­cline in In­dia in terms of vol­ume. We ex­pect iphone sales to be be­tween 2-2.5 mil­lion as com­pared to more than three mil­lion last year,” Tarun Pathak, As­so­ciate Di­rec­tor at Coun­ter­point, told IANS.

There are mul­ti­ple fac­tors for this. “First, the year started for Ap­ple with mul­ti­ple duty hikes on im­ported hand­sets. This led to an in­crease in iphones prices as Ap­ple is yet to as­sem­ble lo­cally, bar­ring a cou­ple of mod­els where vol­ume con­tri­bu­tion is low,” Pathak ex­plained.

Ad­di­tion­ally, said Pathak, Ap­ple has stream­lined its chan­nel strat­egy in a bid to of­fer more sta­ble pric­ing which had some short-term im­pli­ca­tions but can turn out pos­i­tive for the long term. Cook ex­pects that at some point, the In­dian gov­ern­ment will al­low Ap­ple to bring its stores into the coun­try.

Ac­cord­ing to Pathak, Ap­ple’s strat­egy of bring­ing in their own stores has been de­layed. “It means Ap­ple needs to put in ex­tra ef­forts to un­leash more po­ten­tial out of the In­dia mar­ket and this is likely to hap­pen. Once price sta­bil­ity comes in, a lot of things will even­tu­ally start set­tling in,” Pathak told IANS.

Ac­cord­ing to ex­perts, In­dia has a large un­tapped user base in Tier II and Tier III ci­ties and be­yond, and Cook is aware of the tremen­dous growth op­por­tu­nity there. Ac­cord­ing to Upasana Joshi, As­so­ciate Re­search Man­ager, Client De­vices, IDC In­dia, the older mod­els have done bet­ter for Ap­ple in In­dia than the re­cent launches, ow­ing to price cuts and dis­counts of­fered on them, thus driv­ing af­ford­abil­ity.

“With the change in strat­egy for In­dia mar­ket by fo­cus­ing more on cur­rent line-up of mod­els and phas­ing out the pre­vi­ous ones, it will fur­ther re­duce the vol­umes for the brand as the larger pro­por­tion of its sales would move to high end,” Joshi told IANS.

Cur­rently, said Joshi, it is im­por­tant for any smart­phone brand to es­tab­lish sur­face-mount tech­nol­ogy (SMT) type man­u­fac­tur­ing fa­cil­ity to re­duce the im­pact of duty hikes on im­ports and sus­tain with cur­rency fluc­tu­a­tion which, ac­cord­ing to Cook, are just “speed bumps”.

SMT is a method for pro­duc­ing elec­tronic cir­cuits in which the com­po­nents are mounted or placed di­rectly onto the sur­face of printed cir­cuit boards (PCBS). “This is true es­pe­cially for brands

like Ap­ple which have lower vol­ume base as com­pared to Xiaomi, Sam­sung, Vivo and OPPO who have set up such fa­cil­i­ties lo­cally.

“Also, the in­tro­duc­tion of a mid-end de­vice or re-fo­cus­ing on sell­ing older mod­els might help Ap­ple re­gain its lost share in In­dia in the com­ing quar­ters,” Joshi noted. Ap­ple is an as­pi­ra­tional brand and usu­ally bought by those who have high spend­ing power or can com­pro­mise on older gen­er­a­tion phones for af­ford­abil­ity.

“If Ap­ple aims to tar­get the In­dian mid­dle class, it will have to launch prod­ucts which are a bit more pocket-friendly where con­sumers can still feel the sense of the pride for own­er­ship as they cur­rently do with cheaper iphones,” said Joshi. Cook said that he is “a big be­liever in In­dia, very bullish on the coun­try and the peo­ple and our abil­ity to do well there”.

The Ap­ple chief may be

look­ing to realign its In­dia poli­cies next year, cre­at­ing an ecosys­tem for the large mid­dle class which is in­un­dated with cheaper Chi­nese premium smart­phones and won’t mind spend­ing some more for Ap­ple de­vices pro­duced lo­cally.

(The views ex­pressed are strictly per­sonal)

The Ap­ple chief may be look­ing to realign its In­dia poli­cies next year, cre­at­ing an ecosys­tem for the large mid­dle class which is in­un­dated with cheaper Chi­nese premium smart­phones, and won’t mind spend­ing some more for Ap­ple de­vices pro­duced lo­cally

Ap­ple must over­haul its pric­ing strate­gies to ef­fec­tively at­tract the In­dian mid­dle class from reign­ing ri­vals

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