Apple can add 62M iOS users in India but it won't be easy, analyst says

in General Discussion edited May 2016
Investment firm Piper Jaffray estimates India could contribute some 62 million iOS device users to Apple's user base if the company successfully ramps its presence up to China levels, but a comparatively low-income population and strict government policies presage a rough path ahead.

Apple CEO Tim Cook visits the Mac lab at GNITS women's college in India. | Source: Tim Cook via Twitter

Analyst Gene Munster, in a research note obtained by AppleInsider, said India's untapped smartphone market represents a massive growth opportunity for iPhone over the next few years. Indeed, Apple is already laying the groundwork to introduce its entire product line -- hardware, software and an internet services backbone -- to the burgeoning market.

India's potential is mirrored by other key growth markets, namely China. Citing recent studies, Munster notes only 17 percent of the country's 1.25 billion citizens own a smartphone, with Apple holding a 3 to 5 percent marketshare in 2015. That's a far cry from the Chinese landscape where smartphone penetration rates reached an estimated 58 percent for 1.37 billion consumers.

Reports disagree on Apple's share of the Chinese market, but Munster references IDC's figure of 10 to 15 percent by quarter. Based on these calculations, Apple sold about 4 million iPhones in India in 2015, versus approximately 56 million in China over the same period.

Based on the current Indian annual smartphone base, Munster estimates Apple would add 10 million in incremental iPhone units if it increases Indian marketshare to China levels. That number jumps to 16 million iOS users assuming identical smartphone penetration rates and carrying over Apple's current Indian marketshare. Combining the two hypotheticals -- equal marketshare and smartphone penetration rates -- Apple would net a whopping 62 million iOS device users from India.

However, Apple faces significant barriers to growth. Notably, Indian citizens are, on average, less wealthy than their Chinese counterparts -- Apple might price itself out of the market. The iPhone likely owns 40 to 50 percent of the high-end smartphone sector in India, Munster says, meaning the company might be forced to sell down market or create a new tier catering to the demographic. To this point, Apple has more than once applied to import preowned iPhones in a bid to better compete on price, but India's government has not been receptive. Official reportedly rebuffed such a request earlier this month.

Cook meets Indian Prime Minister Narendra Modi.

Munster also notes the smartphone purchasing and ownership experience is unique to the region. Consumers in India usually get their phones through small retail channels, not cellular carriers. Apple is looking to sell directly to Indian consumers through official Apple Stores, but government policy again poses a challenge. In particular, Apple faces resistance from India's Foreign Investment Promotion Board, which is pushing manufacturers to source at least 30 percent of goods sold from local suppliers. Foxconn is reportedly close to signing a deal to open iPhone manufacturing plants in India, but it could be 18 months before those facilities go on line.

Finally, India lacks a widely accessible 4G LTE network, nullifying many features and connected services that form the bedrock of Apple's iPhone platform. Cellular providers are this year building out their wireless capabilities.

During Apple's most recent earnings conference call, CEO Tim Cook said India is a major focus for the company's future growth strategy. Cook met with Prime Minister Narendra Modi when he visited the country last week as part of an international business tour.

Apple is pursuing a multi-pronged approach to the Indian market that includes comprehensive evaluations of government operations, consumer culture, media, services, technical talent and more, Cook said in an interview last week. For example, the company recently opened a Maps development facility in Hyderabad and announced plans to build an iOS design and development center in Bengaluru.


  • Reply 1 of 11
    SpamSandwichSpamSandwich Posts: 28,616member
    I have a feeling India will prove to be a bust over time. No, I'm not going to provide evidence supporting that feeling.
    edited May 2016
  • Reply 2 of 11
    radarthekatradarthekat Posts: 2,165moderator
    While all this information about the red tape and how long it'll take to build out manufacturing or development facilities, and the progress of the 4G LTE rollout might be fresh information to analysts, and to the rest of us, I know how corporate road mapping works.  This is all very well factored into Apple's plans for India.  Plans that were likely formed four or more years ago and have been evolved steadily since in order to account for progress and events in India.  Plans that take into account, at each step of the way, how much should be invested and which initiatives should come on line at which points in time, to efficiently and effectively stage their way into an almost ready to blossom market.

    And yet, the analysts, no doubt mistakenly assuming that Apple is coming to the situation only recently, reflecting the analysts own awakening, all seem to assume that Apple just discovered India, this country of 1.2 billion, and are now scrambling to react to it.  How naive.  It's as though none of them ever built a company, or ever heard of long-term strategic roadmapping. 
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  • Reply 3 of 11
    I've heard for almost 20 years that Apple isn't about market share over quality, but I keep reading stories like this. Tim is all about marketshare.
  • Reply 4 of 11
    anantksundaramanantksundaram Posts: 18,376member
    I have a feeling India will prove to be a bust over time. No, I'm not going to provide evidence supporting that feeling.
    Your 'feeling' amounts to a hill of beans, then. 

    As as an aside, to those who believe fervently-- and possibly rightly -- that Apple can go many, many years without the next blockbuster product (the last one being the iPad), how many are NOT willing to wait at least until 2022 (i.e., six years from Cook's visit) for India to happen?

    (Hint: There's only one non-hypocritical answer to this question, and SS has already disqualified himself! ;-)). 
  • Reply 5 of 11
    evilutionevilution Posts: 1,251member
    Yes there are a lot of poor people in India but there are a lot of rich people too.
    They have a space program despite receiving billions in aid.
    They have disparity between the rich and poor.
    Plus I read recently that India has one of the highest number of Billionaires.

    Opening up a production factory seems like a no-brainer. Employ the poor, sell to the rich, be allowed Apple stores in India. Everyone wins.
  • Reply 6 of 11
    calicali Posts: 3,495member
    Apple should just acquire India.
  • Reply 7 of 11
    tokyojimutokyojimu Posts: 334member
    We've all been enjoying our iPhones since long before LTE was widely rolled out. My US-bought iPhone doesn't even get LTE signals in Asia and I never even notice.
  • Reply 8 of 11
    cnocbuicnocbui Posts: 3,613member
    In the matter of just a couple of weeks, Apple has apparently doubled it's market share in India, going from less than 2% to 3-5%.  At this rate they will have 100% before the year is out.
  • Reply 9 of 11
    michael scripmichael scrip Posts: 1,910member
    bdkennedy said:

    I've heard for almost 20 years that Apple isn't about market share over quality, but I keep reading stories like this. Tim is all about marketshare.
    Tim is all about selling products.

    Apple will never have a large "share" in the global smartphone market where over 300 million units are sold every quarter.

    But Apple can certainly try to sell as many units as they can... in as many markets as they can.  Why would they not?

    Nobody wants to sell fewer products.
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  • Reply 10 of 11
    foggyhillfoggyhill Posts: 4,485member
    Tim Cook is a great marketeer. He relies more on market share that on quality.
    If Tim wanted market share he'd just create a $100 phone or have a $100 watch.
    As for "lower quality", prove it or STFU.

    So, POs throll spammer (with possibly multiply accounts), go back to MacRumor were they love this crap.

  • Reply 11 of 11
    VisualSeedVisualSeed Posts: 217member
    michael scrip said:
    Nobody wants to sell fewer products.

    Most companies don't aim for volume, they aim for revenue and profits. If you can make more money selling 10 items than selling 100 and you know you have a market for 10, then why waste the effort making and selling 100? 
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