What Apple should do to revive the iPhone in India
Apple is coming off a horrid 4–5 months which is very uncharacteristic for the richest company in the world. Its stock has taken a bit of tumble because of the US-China trade war, it missed its quarterly revenue guidance which has given belief to experts that the Midas touch has gone away from Cupertino and its phones aren’t as popular as they once were even though it sells more iPhones than it ever has. The core of the issue is that Apple is too dependent on the iPhone for its overall revenues. If the iPhone falls that means even the rest of Apple is doing well, Apple will likely have a bad quarter. And that’s happening because the iPhone has become a luxury product and the growth for smartphones has ended in developed markets. Smartphone growth is fuelled by emerging markets like India. In India, Apple struggles big time with less than 1% market share. If Apple can fix India, chances are it can deploy the same fix to other emerging markets and get back the iPhone on track.
What are the problems?
Part of Apple’s problem is that it has been lobbying the Indian government for all kinds of subsidies without offering much in return. It has to realise Apple is not special in India. There is no reason why the Indian government should court favour to Apple because it is Apple. It should stop the lobbying and get to work.
- Lack of Apple stores has also meant that Apple’s legendary after sales isn’t what it is in other markets in India. For instance, in the US an iPhone with a cracked screen is often replaced with a new one; in India, just the screen is replaced.
- The lobbying has delayed a lot of things — for it to localise manufacturing in India for tax rebates to it manufacturing enough components locally for devices to make the sourcing cut to open single-branded stores.
- It has to understand how people in developing markets operate — they don’t use credit cards that much for instance — you can’t use either the App Store or iTunes Store without a credit card in India. That’s a fail.
- Apple’s USP of vertical integration of software and hardware falls flat in India. Its services are mostly not customised or present in India. Apple News and Apple Pay don’t work in India while Apple Maps has just recently got turn by turn navigation while Apple Music has been there but it doesn’t have a free tier something that’s important.
- Unlike many other brands, Apple’s refusal to absorb the import tax and strength of the dollar against the Indian rupee has made the iPhone and very expensive proposition for even the affluent. The iPhone remains the best phone in the world but in India, it is so expensive that it doesn’t make sense for many people as something which is good enough like the OnePlus 6T costs almost 1/3rd lesser.
- Then there is the case of some kind of critical mass. The iPhone XR wasn’t a cheap iPhone, so that was never going to work. It needs a successor to SE which was the phone which fuelled its growth in India.
How to fix the problems?
Most people don’t realise that Apple has been working on fixing a lot of these problems it’s just that decisions that have been taken years ago are now starting to bite it back as the growth of the iPhone has stalled in US and China.
- It needs to start manufacturing its phones in India. That’s already happening. The iPhone SE and 6S are already being made while there is a lot of chatter than iPhone XS will also get locally manufactured by Foxconn. That should take some of the stings from the price of the iPhone and also protect Apple from its manufacturing over-dependence on China as this trade-war would get worse if Huawei’s CFO is extradited to the US from Canada.
- Local manufacturing will naturally lead to the creation of Apple Stores which are considered to be the secret sauce behind Apple’s incredible premium positioning. It will be able to also retain its incredible after sales service which it hasn’t been able to in India to the degree it would like. This is more important as a lot of Apple products carry global warranties.
- The software has to be customised for India. Already we’ve seen Apple Maps now offers turn by turn navigation in India and Apple is now working towards taking end-to-end ownership of the Maps data which was previously sourced from TomTom. Apple should also try to bring Apple Pay and its rumoured video streaming service to India at launch and further enhance Siri for Indian languages.
- Like Tim Cook indicated in the recent earnings call — it most definitely needs to absorb the taxes and the strength of the dollar if it wants to sell more iPhones. With the iPhone X, the average selling price of the iPhone increased. In 2017 it didn’t feel the heat because it was highly awaited 10th-anniversary redesign of the iPhone, but in 2018 it has certainly felt the headwinds of the changing dynamics of the smartphone market.
- Apple didn’t need an iPhone XR, what it needed was a brand new iPhone SE for India. An iPhone SE which was priced at less than Rs 50,000 coupled with the older iPhone 8 models and the iPhone XS would’ve been a great strategy. Now, definitely needs a new iPhone SE that has a fresh design and updated components especially on the camera and display side.
- Another thing that Apple must do is have some kind of carrier subsidies like in the US and have micro-financing options for a market like India. It already does this, but it needs to double down on this.
- Apple should also look at making Apple Pay more broad ranging with an eye towards India. For example, Samsung Pay is backwards compatible with point of sales (PoS) machines. Of course, this will need dedicated hardware on the device side as well. That said, Apple will do well to customise the service for India, if it is serious about competing with the likes of Google Pay, Paytm, Samsung Pay etc.
In the early 2010’s Apple marked out China as a key growth market and it customised its products for it too, but it ignored India and now that India has overtaken the US as the second largest smartphone market in the world, it finds itself in a soup as it has allowed the likes of OnePlus and Xiaomi to capture the imagination of India. Indians are starting to consider Apple as a rip-off because of the gulf in the prices of products by companies like Xiaomi and OnePlus. It needs to take these basic steps to turn the tide for the iPhone in India.