Apple
But two major problems currently hold Appleback from success. First, in spite of the growing Indian middle class, most Indians simply cannot afford iPhones. Second, the functionality of the brand's iconic services, like Apple Maps and Siri, have been hampered by poor performance within India, causing a corresponding decline in popularity and appeal.
One key item on Apple's Indian agenda is opening more physical stores. While more stores may increase brand awareness, it may not be enough to make true inroads into the market.
In terms of the softer attributes of the brand, like product image and social cache, the iPhone is doing fine. It remains an aspirational luxury item for many Indians, where average prices for smartphones are $150 or less. In most other countries, Apple sells its iPhones through partnerships with telecom operators, who subsidize phone costs. But because the company has not taken this strategy in the Indian market, Indians must pay full price on iPhones, plus an additional, heavy local tariff on imported electronics, so that even the cheapest iPhones cost over $1000 in India.
Apple is now trying to circumvent this tariff through partnerships with local manufacturers, like Taiwanese contractor, Wistron (TPE: 3231), to produce the iPhone SE, the cheapest model available in India. Apple's competitors, which include Samsung (KRX: 005930), Xiaomi, Vivo and Oppo, have slowly gained dominance in India, with roughly 80% of the market to Apple's 2.2%. Apple's comparatively higher prestige can't help the company compete.
Meanwhile, Samsung and Xiaomi are tough competitors, offering wider selections within the most popular $100 to $150 price bracket. These same competitors have also invested in features targeting problems endemic to India. For example, Xiaomi's MIUI operating system is integrated with popular local online systems like Paytm, and it is equipped to block unwanted phone calls and texts, a major problem for Indians. Apple has failed to offer comparably tailored services. Apple Maps is riddled with functional inadequacies. Siri is incapable of discerning many Indian words, often failing to decipher Indian accents. Apple Music is the lone, well-received outlier.
Samsung and Google
Thus Apple has squandered its early advantage in the Indian market. Apple was one of the few international firms that maintained a software development team in India a decade ago, but it laid off most of its staff in 2006 to focus elsewhere.
Given its current stasis, Apple cannot afford to underserve any segments of the Indian market. Apple is now urging India-based developers to create apps specific to the local markets, rather than chasing Western consumers. Apple has also begun to acknowledge Indian buying habits by giving high discounts on select iPhone models and improving the developer ecosystem to offer the best-fit product lineup for India.
Despite Apple's missteps in the Indian market, analysts are optimistic. Apple ended its final quarter of 2017 with record-breaking revenue growth, even though the Indian government raised smartphone customs duty for 2018-2019 in an effort to promote domestic manufacturing. All phone models were effected except the SE, which is the only model produced locally. Apple also plans to create a budget iPhone facility in India, which might help it capture a portion of the lower end of the smartphone market.
In Q4, international sales constituted 62% or $32.6 billion of Apple's total revenue. India currently stands as the second-largest smartphone market in terms of shipment, behind China but surpassing the U.S.
