Apple iPhone — one of the most expensive phones vended today—seems to lose Indian market as the share of its sales declined in 2018 compared to 2017. iPhone considered to be a badge of social repute in any society failed to imprint its foothold in the market as per the target.
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 Rs 76,900 ($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.
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% of new customers in recent months have been defectors from Apple, suggesting even some loyalists are opting out of upgrading their handsets.
The company, facing down a handful of regulatory headaches, lost some of its top executives in India at the start of this year.
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.
Along with local firms like Lava, global smartphone giants including Samsung Electronics Co Ltd, Oppo and Xiaomi Corp have responded aggressively, investing millions of dollars in plants around Bengaluru and Delhi tech hub Noida.
Apple is the only major player which does not manufacture phones in the country and it only assembles two low-cost older models through Wistron Corp in Bengaluru.
Industry experts say as a result the company still imports about 70-80% of its phones. That results in high import duties, which in turn make the phones expensive.
In the United States, the basic iPhone XR model costs $749 or roughly Rs 54,400, only two thirds of its retail price in India. Beyond that, while US phones are subsidized under deals with wireless carriers, Apple’s phones in India are not.
“Apple doesn’t have enough confidence … in the Indian manufacturing system right now, to set up plants and move some of the manufacturing out of China,” said analyst Navkendar Singh of tech consulting firm IDC.
Diwali, the Festival of Lights, is peak selling time for electronics in India, but the Apple-licensed store in one of Bengaluru’s big shopping malls was deserted this past Saturday.
“Features of the emerging phones are very similar to an iPhone,” says salesman Aejaz Ahmed, adding volumes have fallen in the past few months. “It is very difficult to make out the difference from a distance because they even look so alike.”
Sales staff at several stores in Bengaluru and nearby Chennai pointed to the launch this year of the latest OnePlus phone as a major problem for the US phonemaker. At Rs 37,999, the Chinese company’s 6T is half the price of the XR.
The result, says Neil Shah, from Counterpoint, is that Apple’s user base in India is set to decline about 10% to nine million users this year. That compares to an estimated 436 million Android users.
“If your user base is declining, you are losing grip on the market,” he says. “The new customer base is not coming.”