Can Apple put a dent in the world’s 2nd largest market with iPhone 7?

“We’re here to put a dent in the universe,” said Steve Jobs most famously – and Apple did so with great products like the Mac, iPad, iTunes, iPod, and iPhone that reimagined computers, music, and phones.

How ironical that Apple still can’t find a way to put a dent in the world’s second largest market for smartphones: India. Some may quibble over whether India has already gone past the number of smartphone users in the US, or will do so in the near future. In any case, the matter will soon become moot because India is the fastest growing smartphone market in the world.



Apple’s market share in India, however, has fallen from 4 percent to a mere 2 percent in the last year, shows data from Strategy Analytics. It shipped 0.8 million iPhones in the last quarter, which was two-thirds of the 1.2 million in the same period last year. Will the launch of the iPhone 7 on September 7 reverse the slide?

The main issue is price in a market flooded with affordable smartphones from South Korea’s Samsung and Chinese brands as well as homegrown phone maker Micromax. The Android OS has 97 percent of the market.

Apple has resisted calls to bring out an affordable iPhone for markets like India which have a far lower purchasing power than the US and China. “I don’t believe personally in trying to be something you’re not. We are what we are. We’re a California company,” Apple CEO Tim Cook said in an interview on news channel NDTV during his visit to India earlier this year.

Many speculate the real reason is that Apple fears a more affordable iPhone will cannibalize its high-end phones which have a big profit margin. Apple maintains that the high prices are because of its commitment to provide the best quality. Be that as it may, it faces a challenge going forward as its growth stalls.

iPhone SE proved a damp squib

PHOTO: AFP

With smartphone sales flattening out in the US and China, the last remaining big opportunity is in India where a majority of the 1.3 billion population is yet to own a smartphone. Apple does recognize this. But its efforts to target segments below the high end have been half-hearted at best.

Earlier this year, it introduced the iPhone SE, touting it as the best 4-inch phone ever. But those in India looking forward to an affordable iPhone with a smaller screen but cutting edge specs were in for a shock. It was priced at INR 39,000 (US$585) in a market where anything over US$200 is considered a pricey phone.

The iPhone SE was priced lower in the US, at US$399. That made it nearly 50 percent costlier in India, where the per capita income is one-tenth that of the US. India is in fact one of the most expensive places in the world to buy an iPhone.

Import duties are only part of the reason for this. Apple’s lack of distribution channels also contributes to it.



Small retailers, especially in tier-2 and tier-3 cities, would rather stock the fast-moving affordable smartphones than iPhones for which there is little demand. Apple has been prevented from opening its own stores because India requires at least 30 percent local sourcing of components in products sold at single brand retail stores. This has now been relaxed for companies that bring “cutting edge technology” to India, but Apple still awaits approval.

Meanwhile, the poor distribution network and low demand make India one of the last places for new iPhones to reach. They will probably arrive only a month after their US release, as in the case of the iPhone 6 a couple of years ago.

Value for money?

So where does that leave the iPhone 7? Will it help Apple put a dent in the world’s second largest and fastest growing phone market?

It would have to be a revolutionary new product, like the ones Steve Jobs launched to put a dent in the universe; otherwise it will be business as usual in India, with a lot of excitement and talk over the new iPhone before 97 percent of smartphone users go back to their Android phones.

From the leaked specs so far, there’s no hint of anything revolutionary about the iPhone 7. Bluetooth-powered headphones, dual rear camera, and such are not going to cut it with India’s tech-savvy buyers well versed with phone specs.

In theory, young, upwardly mobile, and aspirational Indians will take to the iPhone 7. But will there be significant numbers of them willing to shell out nearly US$1,000 for the base model of iPhone 7, when there are so many other cool smartphones around which are far more reasonably priced? Of course, there will be those who are not price sensitive and must have the exclusivity of owning the latest iPhone – but they’re a relatively wee number.

Lure of the app ecosystem

More interesting for India’s large tech community will be to see what the new iOS 10 will do with the latest A10 processor. It’s the app ecosystem around the iPhone that makes the nerdy buyer want to possess it.



Apple has also finally woken up to the capability of India’s mobile tech development community. During his visit, Tim Cook announced the setting up of a new iOS app design and development accelerator in Bangalore early next year to encourage local entrepreneurs.

But if you look around the various hackathons running in Bangalore, they are filled with Android developers. Most new apps launched in India these days are first in Android, and an iOS version is added on later if required. Hardly surprising, with Android having 97 percent of the market.

So the bottomline is that Apple will have to find a path to growth in order to make a dent in India. Instead of being hung up on the high profit margins at the high end, it will have to reach down to the middle segment with a more affordable iPhone some time in the near future – after the buzz over the iPhone 7 blows over.

This article originally appeared in Tech in Asia.