Tim Cook faces Sundar Pichai hurdle in battle for India

iPhone will have to break Android's domination to make India the next China for Apple

Tim Cook wants to turn India into Apple’s next China. However,  rival Google — headed by India-born Sundar Pichai — could spoil its plans with its new Pixel smartphones.

Google might be a late entrant on the smartphone scene, but is at a clear advantage in India, where its Android OS runs on 94 per cent of all devices sold. While Apple might boast that its sales in India grew 50 per cent in the year ended September, its base is still tiny at just 2.5 million units. Indian consumers bought around 115 million smartphones during the period.

“In India, 94 per cent of smartphone users are on Android, so most of them will want to upgrade to the next best Android device. This has usually been the Note 7 or S7 from Samsung, but now there’s Google Pixel. With much more marketing behind the Pixel, Google could win significant mindshare,” said Neil Shah, partner at Counterpoint Research.

With Google’s entry into the high-end smartphone market, it could become harder for Apple to wean away Android users looking to upgrade to a premium device. The Pixel phones, priced at Rs 57,000 and above, went on sale in India on Tuesday, and are  competition for Apple’s iPhone 7.

Samsung has a 55 per cent share of the around four million premium smartphone (Rs 30,000 and above) market in India.

But, with iPhone sales dropping globally, especially in the US and China, winning in India has become imperative for Apple.

In its fourth quarter earnings call on Tuesday, Apple reported a nine per cent drop in revenues to $46.8 billion (Rs 3.12 lakh crore) from $51.5 billion (Rs 3.44 lakh crore) in the corresponding quarter last year.

Sales of the iPhone, which constitutes half of Apple’s revenues, dropped five per cent to 45.5 million units in the quarter from 48 million units a year ago. In China, Apple suffered its biggest loss, with revenues eroding 30 per cent to $8.78 billion (Rs 58,690 crore) from $12.51 billion (Rs 83,624 crore) last year.

In India, iPhone shipments improved from 1.6 million units in the year ended September 2015 to 2.5 million units in the year ended September 2016, according to Counterpoint Research.

Still, Cook believes India can be as big a market for Apple in the next decade as China. During the Q4 earnings call, he said while India’s gross domestic product might not rival China’s in the next 10 years, he said the metric was “not critical for us to have great success there”.

“There's going to be a lot of people there and a lot of people in the middle class that will really want a smartphone, and I think we can compete well for some percentage of those. And given our starting point, even though we've been growing a lot, there is a lot of headroom there,” added Cook.

As India kicks down barriers for premium smartphone usage such as lack of high-speed wireless connectivity, Apple thinks iPhone sales will benefit. However, the improvements Reliance Jio and other network providers bring to internet speeds will boost the overall market, including rivals Google and Samsung.

Shah says it might still be “very difficult” to get people using the iPhone to switch to any other OS, making it hard for Google to steal customers from Apple. However, in India, with iPhones controlling just 2.2 per cent of the market, if Google can defend its turf it does not have to worry about Apple.