For Apple, India Is the Next China

Apple’s playbook in India is evolving, from testing the country as a counterweight to China’s supply-chain dominance to viewing it as an emerging growth hub for demand.

Both of these strategies are working off each other.

Last week, Apple unveiled the look of its first retail store in India that is set to open this month, signalling India’s growing importance for the Cupertino, Calif.-based company. Until now Apple has sold iPhones and other products in the country mostly through resellers, e-commerce websites and large format retail chains. With the opening of its own famed brick-and-mortar store, it is adding another critical layer to this wide distribution.

The move isn’t surprising given Chief Executive Tim Cook in February called India a major focus for Apple, adding that the company is putting a lot of emphasis on the market. On the call, Apple said it posted record iPhone revenue in India in the December quarter, though they didn’t give a specific figure, even as overall revenue declined.

It is no secret that Apple has been growing its manufacturing base in India as it works on a China + 1 strategy. But this narrative has overshadowed India’s steady climb up the luxury ladder over the past few years, and the opportunity it presents for Apple to find the next lucrative market similar to China.

Making iPhones and then selling them in India ensures a smooth supply chain—a page directly out of Apple’s massive success in China over the past decade. Daniel Ives, an analyst with Wedbush Securities, believes that now the company will have “skin in the game” building out production in India with retail success along the way.

For several years, Apple struggled to make a dent in the Indian market and compete against more affordable Chinese models. Only now is it gaining traction. Apple had a mere 1% market share in 2019 and may cross a 5% share this year in the country’s overall smartphone market, according to Counterpoint Research. To be sure, that contrasts with Apple’s market share in China of 22% in the last quarter of 2022.

Still the market has potential, even if prices of iPhones may have to come down further. According to another research firm, Canalys, India’s premium smartphone segment, defined by sale prices above $500, has doubled to 6% of overall market share last year from 3.1% in 2019, and Apple’s share of this segment was at 60.13% last year.

Harsh Kumar, an analyst at Piper Sandler, argues that India and China are quite similar in their demographics and even in their potential buying power, at least in large cities—and that India can show large numbers for Apple with some effort.

India is the second-largest smartphone market globally, both in terms of annual shipments and sales, accounting for almost 12% of the global market, according to market intelligence firm IDC. Despite this, smartphone penetration is still less than 50%—providing an unmatched potential for growth for Apple.

Navkendar Singh, an analyst at tech researcher IDC, believes that Apple’s work on channel expansion, focus on affordability through attractive trade-in programs, discounts, cash-back offers and better pricing on prior-generation models are finally bearing fruit. But the gap between Apple and other models is still quite wide—the average selling price of a smartphone in India was $206 last year, excluding taxes, vs. $898 for an iPhone, according to Canalys.

But the price of Apple’s cheapest model can go below $500 with discounts. A larger manufacturing base with a thriving component ecosystem in India could bring prices down a bit further.

India is at the forefront of Apple’s efforts to decouple from China’s factory floor but may even prove itself as a growth market—with some conditions applied, of course.