For premium phone maker Apple Inc ., growth in price-sensitive India finally did come, but at a price.

Thanks to a strategic shift in pricing strategy, India, once an insignificant market for Apple, has bounced back to growth in the fiscal third quarter at a time when the Cupertino, California-based company sold fewer iPhones globally compared with the previous year.

In an analysts’ call to discuss earnings for the quarter ended 29 June, Apple chief executive Tim Cook expressed happiness on the sales performance in India which “grew (in) strong double digits", and where it has ambitions to step up manufacturing capacity.

“India bounced back during the quarter, we returned to growth there. We’re very happy with that," Cook said on Tuesday.

The rebound was driven by a change in Apple’s consumer plans for the world’s second-largest mobile phone market, dominated by Chinese budget brands such as Xiaomi, Vivo and OPPO.

For the first time in its history, Apple went against the grain and decided to opt for price cuts and credit card cashbacks for its flagship model iPhone XR.

In April, the phone maker brought down the price of the 64 GB iPhone XR from ₹76,900 to roughly ₹59,000. Similar discounts were introduced for other variants of the same model as well.

The price-sensitive Indian consumer lapped up this scheme, and, almost overnight, the model became a best-seller in the category. An improvement in Apple’s performance in India is key given its ambition to make top-end models in the country through its supplier Foxconn Technology. Local manufacturing will offer it more room to cut prices.

“In the past, the company was gloriously indifferent to India. The softening of global demand seems to be driving their new approach. Potentially, India is a large market and Apple is a desirable brand but currently too expensive for the market. Given that their new product pipeline isn’t as exciting as it once was, it makes sense for the company to activate the Indian market through aggressive pricing and discounts while they still can," said Santosh Desai, CEO of brand management consultancy Future Brands.

Apple’s sales volume in the premium smartphone segment in India ( ₹30,000 and above) doubled annually in the June quarter driven by the price correction for iPhone XR. It, however, lags behind Chinese smartphone maker OnePlus which captured its highest-ever shipment share of 43% in the June quarter and is the leader in the premium segment followed by Samsung with 22% share, Counterpoint Research said on Wednesday. Apple has 20% share in the premium segment but a minuscule share in the overall domestic smartphone market.

Apple’s change in stance towards India also comes at a time when the growth in premium smartphone category is outpacing that of the overall smartphone category. Middle class incomes are rising and smartphones are becoming lifestyle statements than just devices. Moreover, a new player such as OnePlus has entered the market, which was once dominated by only Samsung and Apple. Budget brand Xiaomi is also eyeing the premium phone segment.

“There is demand and opportunity in the premium segment. Moreover, barriers to entry in the segment have come down with prices declining. The Indian youth thinks of a smartphone as a lifestyle statement and is convincing the household decision-maker to opt for a longer-lasting premium phone than having to invest in multiple budget phones over time," said Tarun Pathak, associate director at Counterpoint Research.

Competition in this segment is expected to grow with the launch of more devices in the second half of 2019.

Apple, however, needs to be cautious in its approach to win a market like India, brand strategist Harish Bijoor said.

“Brand Apple is an insignia which signifies top quality and durability. The new move to discount phones is not an ideal one as it shows that the company is making compromises which it must not," Bijoor said. “Indian smartphone market is broad at the bottom and narrow at the top and Apple must focus at the top. While aggressive pricing will get Apple volumes, it would compromise on its imagery. Staying true to the brand will give your long-term returns and that was the brand principle on which Apple was founded," he said.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via