India is the apple of CEO Tim Cook's eye as iPhone sales spike over 50%

Reaffirms India retail store plans as iPhone sales in India stay robust

India has become among the fastest growing markets for Apple. While that might seem stellar considering that iPhone sales have been declining globally, the growth is only in line with that of the overall smartphone market in the country.

iPhone sales in India were up 51 per cent during the nine months ended June 30, Chief Executive Officer Tim Cook said during an earnings call with analysts and investors. This growth has prompted Apple to think about setting up retail stores in the country.

“We're looking forward to opening retail stores in India down the road, and we see huge potential for that vibrant country,” said Cook.

Taking a closer look at the figures, iPhone sales in India stood at around 600,000 units in the April-June period, against the overall smartphone sales of 28 million units, according to research firm Counterpoint. That puts Apple’s market share at two per cent, exactly where it was in 2015.

While Apple has grown quickly in India, so has companies such as Lenovo, Xiaomi and LeEco, thus making the country the fastest growing market. Indian smartphone market is dominated by devices running Google’s Android operating system. “The India market is not as mature as the China market just yet. It will take three or four years to have half a billion smartphone population and, hopefully, they will be mature enough to pick a flagship smartphone as their next smartphone. Apple is still waiting for that to happen,” said Neil Shah, partner at Counterpoint Research.

In India, half the demand for iPhones continues to come from the iPhone 5s, a device that’s nearly three years old and sells for under Rs 25,000. Apple will begin making inroads into the country only when it is able to find more buyers for its flagship devices that cost between Rs 50,000 and Rs 1 lakh.

The company is, however, pushing ahead with its plans to open retail stores in the country. It recently won the support of the government, which decided to relax sourcing norms for single-brand retail. Apart from this, Apple is looking to woo the country’s large developer base to build better apps for its devices.

“Retail is an important part of their strategy. The main benefit from that is that Apple gets to control the retail channel and pricing. Also, it will allow the company to better control the experience right from sales to the customer after sales support as well,” added Shah.

In FY16, Apple is estimated to have controlled only two per cent of the overall smartphone market in India in volume terms, according to research firm Counterpoint.  However, with Apple’s traditional high margins, the firm is estimated to have a much larger (10 per cent) revenue share in the market.

Globally, Apple reported better-than-expected numbers in the quarter to June, even as profits plunged 26 per cent to $7.8 billion from $10.68 billion in the same period last year. Revenue dropped from $49.6 billion to $42.36 billion due to lower sales of its flagship iPhone in markets such as China and the US.

Bloomberg reported that Apple’s lower-cost iPhone SE is gaining more traction than expected with users, tempering a sales decline and soothing investors’ concerns about growth.

The handset, priced at $399, garnered a healthy dose of criticism when it was unveiled in March. It was still too expensive to be attractive in emerging markets, and had the potential to reduce profitability in developed economies because customers would prefer it to be more expensive, higher-margin models, it said.