How Ap­ple is los­ing its grip on In­dia

Financial Chronicle - - PLAN, POLICY - ARNAB PAUL & VIB­HUTI SHARMA

Soft­ware en­gi­neer Samee Alam was ready to take the big leap and buy an iPhone in this week’s Di­wali fes­ti­val sales, but at the last minute he opted for cheaper Chi­nese com­peti­tor OnePlus in­stead.

Alam, 27, spends hours on his phone watch­ing shows, surf­ing and shop­ping, mak­ing him the per­fect tar­get for Ap­ple Inc as it strives to raise sales among In­dia’s 1.3 bil­lion con­sumers.

But in a coun­try where the av­er­age per capita in­come is around $2,000 a year, even the cheap­est of this year’s new iPhones, the XR at 76,900 ru­pees ($1,058), costs twice as much as many of the al­ter­na­tives.

Hong Kong-based Coun­ter­point Re­search says that iPhone sales are fall­ing as a re­sult. From three mil­lion phones in 2017, sales may sink to two mil­lion this year, ac­cord­ing to their es­ti­mate, the first de­cline in four years.

More than half of those sales will come from cheaper older mod­els, and the lack of progress in In­dia was among prob­lems cited by Chief Ex­ec­u­tive Of­fi­cer Tim Cook when he gave a dis­ap­point­ing hol­i­day out­look last week.

Even in the pre­mium seg­ment, smart­phones that cost more than $400, Ap­ple lagged Sam­sung and China’s OnePlus in the third quar­ter.

“I have never used an iPhone and I was keen on get­ting my hands on one but it didn’t make sense,” says Alam, who works for one of the raft of firms to have in­vested in the south­ern city of Ben­galuru, of­ten called In­dia’s Sil­i­con Val­ley.

“I look for stor­age, cam­era and pro­ces­sor in phones and cheaper al­ter­na­tives like OnePlus are more value for the money. The new iPhones cost al­most 100,000 ru­pees - I can get three good phones for that price or even a de­cent gam­ing lap­top.”

Solid Mac sales and the high unit price of iPhones meant Ap­ple’s to­tal rev­enue of $2 bil­lion in In­dia last year was still dou­ble that of OnePlus, which only sells mo­bile phones. But Coun­ter­point’s data says that gap will also shrink.

OnePlus’ In­dia head Vikas Agar­wal told Reuters this week that 10-15 per­cent of new cus­tomers in re­cent months have been de­fec­tors from Ap­ple, sug­gest­ing even some loy­al­ists are opt­ing out of up­grad­ing their hand­sets.

HIGH IM­PORT DU­TIES

Ap­ple’s prob­lems go be­yond price. The com­pany, fac­ing down a hand­ful of reg­u­la­tory headaches, lost some of its top ex­ec­u­tives in In­dia at the start of this year.

An Ap­ple spokesman said the de­par­tures had noth­ing to do with the com­pany’s per­for­mance, but peo­ple fa­mil­iar with the mat­ter told Reuters that the de­par­tures were likely linked to the com­pany chang­ing its dis­tri­bu­tion sys­tem. Ap­ple has cut the num­ber of dis­trib­u­tors in the coun­try to two from five.

The sources, who de­clined to be iden­ti­fied be­cause they have busi­ness re­la­tion­ships with Ap­ple, also said com­pany vet­eran Michel Columb is still work­ing on so­lid­i­fy­ing busi­ness re­la­tions since tak­ing con­trol of the In­dian op­er­a­tion in De­cem­ber.

Ap­ple de­clined to com­ment fur­ther. Prime Min­is­ter Naren­dra Modi’s govern­ment has sought to drive elec­tron­ics pro­duc­ers into man­u­fac­tur­ing lo­cally by steadily mov­ing tar­iffs up the sup­ply chain from sim­ple phone cases to so­phis­ti­cated chipsets and boards. In the United States, the ba­sic iPhone XR model costs $749 or roughly 54,400 ru­pees, only two thirds of its re­tail price in In­dia.

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