China was once the apple of Tim Cook’s eyes (pun intended). Lately, however, things are not all hunky-dory between the both of them.
Revenue from China has seen a continuous decline.
Apple recently announced its Quarter 4 (Jul-Sept 2016) results that show a marked decline in the company’s sales in the Greater China area. The iPhone has been the biggest loser. Compared to the same quarter last year, total iPhone sales plummetted from over $12 billion to around $8 billion. That’s a 30% decline. Gasp!
For a very long time, China was the iPhone’s largest market outside of the US. In fact, in terms of year-on-year growth, China was THE BIGGEST market for Apple. And now, China seems to be the hardest hit by the global slowdown in the smartphone industry.
“We are very bullish on China,” Cook has said. “We continue to see a middle-class that is booming there. There might be some sort of a new normal in the economy, but a new normal there is still a good growth rate.”
Great words, Tim Cook, but it really feels like a half-hearted explanation. More than that, it comes across as a pathetic attempt to save face.
Now, Apple is doing everything within its power to look for a substitute. And as most sports movies have taught us, when the star player of your team is out of action, a new hero emerges to take his place. And more often than not, it’s the underdog – the player who was ignored and ridiculed during the first half of the film!
For Apple, India is that new, unlikely hero!
However, it’s not all free sailing. The Indian market is a fundamentally different from the rest of the world. Highly price sensitive and an overly competitive local market means that Apple has to fight that much harder to make headway. In addition, India caters mainly to low and mid-range smartphones, with high-end branded phones making up less than 15% of the market. Therefore, Apple has to really apply itself and put its best foot forward.
Cook is well aware of the situation, a fact reflected in these words, “The truth is 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’s a lot of headroom there in our mind. So, we’re working very hard to realise that opportunity.”
Some good signs can be seen in the form of new partnerships with the local industries. For example, at the earnings call, Tim went completely gaga about their new partnership with Reliance Jio which is “working to build out an all-IP 4G network in India that will bring coverage to 18,000 cities and 200,000 villages across the country. Further, Jio is offering a free year of service to iPhone buyers.”
Apple looks all set to play the long term game in India. It’s setting up app development centres, startup accelerators, pushing for reform in FDI, and fighting tooth and nail for market share. So, it’s not just empty words that’s being dispersed in the wind. There’s a whole flurry of activity happening behind the scenes.
The bottom line: Apple is committed to expansion in India. And we couldn’t be happier!
