For the first time in 2016, Apple saw a year-on-year decline in its market share in China, falling to fifth place. It is being mauled by Chinese vendors such as Huawei, Oppo, Vivo and Xiaomi (which occupied the first four slots in 2016) that are offering better features, superior technologies, and lower-cost products.
With its prospects in China dimmed, Apple has set its sights on the second-largest smartphone market in the world: India. “I sort of view India as where China was seven to 10 years ago from that point of view. I think there’s a really great opportunity there,” said Apple CEO Tim Cook during an investor call last year.
“I sort of view India as where China was seven to 10 years ago from that point of view. I think there’s a really great opportunity there” — Apple CEO Tim Cook
But this “great opportunity” is simply not Apple’s for the taking. I give it practically no chance of success — unless it quickly realises that it is repeating the mistakes it made in China and tries to understand India. Firstly, it is relying on brand recognition to build a market there, without knowing its customers. Secondly, it is insulting Indian consumers by marketing refurbished and discontinued products.
It is notable that Apple is one of the very few companies in Silicon Valley that doesn’t have even one executive of Indian origin in its leadership team or board. This may be one of the causes for its cultural insensitivities, and lack of understanding of the market it is trying to expand in. And, maybe this is what gives Google and Microsoft their advantage in India.
The Economic Times said that Apple plans to begin manufacturing smartphones in India, starting with the lowest-priced model in its stable, the iPhone SE. CNET reported that the company is marketing a discontinued version of the iPhone 6 through online retailers at a discounted price of $450 — because its products can’t command the same premium in the country. This is after Apple (despite repeated requests) failed to get permission from the Indian government to import refurbished phones amid concerns that it would use India as a dumping ground for old technologies.
Firstly, it is relying on brand recognition to build a market there, without knowing its customers. Secondly, it is insulting Indian consumers by marketing refurbished and discontinued products
Apple needs to recognise that it enjoys practically no brand recognition among the hundreds of millions of Indians who are buying their first devices. Besides, its products are expensive, to say the least, and smartphones with features and capabilities similar to the iPhone sell for a fraction of its cost in India. Also, Apple doesn’t offer any product lock-in schemes to Indian consumers as it has to its western customers, who have owned other Apple products first and are now buying smartphones. iTunes, for example, works best with a laptop or desktop companion. Most Indians don’t own these, and never will.
Another big negative is the fact that the company has not bothered to customise its phones or applications to the needs of Indian consumers — they are the same as are available in the US. Try asking Siri to recognise an Indian name or city, and it is clueless. Or ask it to play a Bollywood tune, for that matter. I tried, and it doesn’t work. You will end up banging your head against the wall trying to get through to Siri. And let’s not even get into the lack of support for Indian languages — everything iPhone does is in American English.
Try asking Siri to recognise an Indian name or city, and it is clueless. Or ask it to play a Bollywood tune, for that matter. I tried, and it doesn’t work
Apple does have an Indian version of its music-streaming service, but it is inferior to those of local competitors such as Saavn, Gaana, and Hungama. The service is also expensive, and it has run into the same problem as the Apple India App Store — it requires credit cards, which less than 1% of the country’s population possesses.
This is no way to conquer a market.
Until recently, Samsung and India’s Micromax dominated the Indian market. But, Chinese brands such as Vivo, Xiaomi, Lenovo, and Oppo are making major inroads in the country, and have captured a 46% market share, according to Counterpoint Research. These companies offer stunning OLED displays (which Apple does not have yet), state-of-the-art processors, and features that are popular specifically in Asian markets, such as dual SIM capabilities and selfie cameras. They are also available in different Indian languages. And using Google’s operating system, Android, enables them to have Google Assistant converse in the Indian languages, including Hindi, which the assistant is learning.
Why then, would first-time smartphone buyers, with no brand recognition for Apple and much lower buying power than consumers in western countries, shell out more than 10 times the amount for an outdated iPhone when they can get devices with better features (and bundled with services) much cheaper?
Why then, would first-time smartphone buyers, with no brand recognition for Apple and much lower buying power than consumers in western countries, shell out more than 10 times the amount for an outdated iPhone when they can get devices with better features (and bundled with services) much cheaper? Take the Lyf phones being marketed by telecom giant Reliance Industries for example. It’s low-end smartphone model sells for $45 and comes with three months of unlimited data, text, and calls. Higher-end models cost about $150 and have features comparable to the iPhone 7 — which sells for $750 and more.
Apple doesn’t even seem to be thinking about reaching the millions of potential new buyers in India.
The company typically sells its products online or through its highend retail stores. It is planning to open three Apple stores in India this year. But, the hundreds of millions of people in India’s villages and small towns will neither come online nor visit Apple stores in big cities to buy these phones. And what about service centres? Chinese vendor Oppo, for instance, achieved great success in India by selling its phone through 35,000 electronics retailers and setting up 180 service centres, according to Bloomberg.
The hundreds of millions of people in India’s villages and small towns will neither come online nor visit Apple stores in big cities to buy these phones
It is also notable that Android now has 97% market share in India. This means that there is little motivation for Indian developers to write software for the Apple platform and it will always be a laggard for hot new apps.
Well-heeled Indians, who can afford iPhones, want the latest and the best smartphone models, not the hand-me-downs Apple is trying to market here. They aren’t buying iPhones because they are technically superior; they are buying them for social gratification and for their brand value. They need to be able to show off to their friends and relatives about having the latest American product.
If Apple is serious about making inroads into the Indian market, it needs to do more than assemble components and open stores here. It must develop new products and services that suit the Indian market and buy local competitors such as Saavn and Gaana. It must create new offerings that Indians really want, and can afford. With 500 million more people about to be connected to the internet via smartphones, India offers a sea of opportunities. But Apple needs to come off its pristine white high horse to be able to navigate this sea.
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Vivek Wadhwa is Distinguished Fellow at Carnegie Mellon University Engineering in Silicon Valley and Director of Research, CERC, Pratt School of Engineering, Duke University. He tweets from the handle @wadhwa. Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.