With domestic manufacturing and rising sales, Apple is increasingly turning to India for its future growth
Madhavankutty Pillai Madhavankutty Pillai | 04 Oct, 2024
The Apple Store in Mumbai, September 20, 2024 (Photo: Getty Images)
LONG BEFORE APPLE came to India, its late founder Steve Jobs was here. This was as far back as 1974 when the company wasn’t even an idea in his mind. He had been working in a gaming company called Atari when he decided that he wanted a guru. Altogether he spent seven months in India and did not find the enlightenment he was chasing. But he didn’t go back empty handed either. In his biography of Jobs, Walter Isaacson wrote: “Years later, sitting in his Palo Alto garden, he reflected on the lasting influence of his trip to India: ‘Coming back to America was, for me, much more of a cultural shock than going to India. The people in the Indian countryside don’t use their intellect like we do, they use their intuition instead, and their intuition is far more developed than in the rest of the world. Intuition is a very powerful thing, more powerful than intellect, in my opinion. That’s had a big impact on my work.’” It ties in perhaps with one of the keystones of Jobs’ conviction that the consumer often does not know what he wants. A product that finds the right balance between engineering and art, and marketed well, will make everyone desire it. It led him to found Apple and then turn it into the most valuable company of the world, fuelled by the iPhone that changed what a phone meant to its users.
And yet, despite, Jobs’ soft corner for India, he consistently ignored the Indian market for Apple. In2006, a software development centre was opened and almost immediately shut down. People could still buy Apple computers, laptops, iPods and iPhones but they were imported and sold for much more than what someone would get the same product abroad. It was such a huge markup that Indians usually got friends and family to buy abroad and get them here. About a decade ago, however, Apple slowly began to take the market seriously. It cautiously first tested manufacturing here with the small iPhone SE which could also be pitched for Indian consumers. This was in keeping with the belief that its high-end phones were just too expensive for volume sales. Come2024, if its latest launch, the iPhone 16, says anything, then it is that some sort of an inflection point is being reached. Media reports have termed the response overwhelming. This was also a phone that was manufactured in India to be sold here and also exported to the rest of the world. In August, during an earnings call after the announcement of quarterly results, Tim Cook, Apple’s CEO, had included India among the countries whose growth had thrust the company’s profitability upwards. He had said, “Today, Apple is reporting a new June quarter revenue record of $85.8 billion, up 5 per cent from a year ago and better than we had expected. EPS grew double digits to $1.40 and achieved a record for the June quarter. We also set quarterly revenue records in more than two dozen countries and regions, including Canada, Mexico, France, Germany, the UK, India, Indonesia, the Philippines, and Thailand.”
Counterpoint Research, which comes out with an Indian smartphone tracker that looks at the sector’s growth, shared a chart that showed how Apple’s year-on-year growth had radically changed in the last five years. In 2019, it was just 5 per cent. Then it became 66 per cent and 90 per cent in the next two years. This was followed by a lull of 16 per cent in 2022 before once again zooming to 46 per cent in 2023. All this happened in consonance with Apple trying to make a handshake with its consumers in India. It launched its online store in India in 2020. Last year, it opened its first two retail stores in Mumbai and Delhi. It was a big signal for Apple taking the Indian market seriously because these were stores owned by the company. It was also something that Jobs had pioneered, where flagship outlets would be a permanent advertisement of the premium that Apple stands for. They would directly connect with customers instead of relying on resellers to show what an Apple experience meant. As its press release following the Indian stores’ opening said: “These new retail locations mark a significant expansion in India that will offer great new ways to browse, discover, and buy Apple products with exceptional service and experiences for customers.” One year later, the two stores were said to have made sales of around ₹200 crore each. When the iPhone 16 launched, there were long queues at both of its stores for it. More stores are now being planned in other major cities.
According to Counterpoint, the stores achieved record sales in its first month placing them among Apple’s top-performing retail stores globally. Shubham Singh, research analyst, Counterpoint Research, said over email, “Apple is a highly aspirational brand in India and is riding on a premiumisation trend in India.” He lists the factors responsible for this as a rapidly growing middle class, urbanisation, consumers having more disposable income, and valuing premium and high-quality products. “Apple focuses on the consumer experience with its ecosystem services and products. Its strong after-sales service and product support for longer durations have helped it build the trust factor and be a valuable proposition to the consumers The financing plans, trade-in discounts, and discounts during the sale season have also played a pivotal role in its growth,” he says.
TWO FACTORS ALSO came together for Apple’s big push into India. In 2020, the government came out with a production-linked incentive (PLI) scheme for local manufacturing of smartphones. At the time, the Ministry of Electronics and Information Technology announced that Foxconn, Hon Hai and Pegatron, contract manufacturers for iPhones, had been approved for making iPhones in India. Recently, the fallout of the scheme became clear when it was reported that Apple had exceeded PLI targets and had exported over $10 billion of iPhones in one year. The second factor that made Apple cosy up to India was geopolitics. Apple’s entire journey to be the world’s most valuable company was underwritten by outsourcing its manufacturing to China. As China became more prosperous, the country also turned into one of iPhone’s biggest consumption market. But then tensions between China and the US started taking its toll on commercial relations. As the New York Times would write early this year in an article: “For a decade, China has been the iPhone’s most important market after the United States and accounted for roughly 20 percent of Apple’s sales. Now the company’s grip on China could be dislodged by a series of factors: a slowdown in consumer spending, growing pressure from Beijing for people to shun devices made by U.S. companies and the resurgence of national champion Huawei.” With Apple needing an alternative for its future growth, India was the natural next step.
Last November, Apple CEO Tim Cook had been asked during an earnings call about the momentum being witnessed in India. He replied that they had set an all-time revenue record and growth was strong, in double digits. And that India was a major focus for them
The Economic Survey, which is released before the Union Budget, had stated that Apple was among the multinationals looking to de-risk themselves from relying entirely on China for its manufacturing. Besides geopolitics, it just wasn’t as cheap to make iPhones there as it used to be earlier. The Survey added: “The rise in India’s domestic smartphone demand is also a key factor in companies’ decisions to invest there. For instance, Apple assembled USD 14 billion worth of iPhones in India during FY24, constituting 14 per cent of its global iPhone production. Foxconn has started production of Apple mobile phones in Karnataka and Tamil Nadu.” The investment firm Jefferies came out with a report recently that said by next year, 25 per cent of all shipment of iPhones would be from here. The iPhone 16 is also much cheaper here as compared to previous years, increasing its appeal. As it looks to remain the world’s most valuable company, India will remain in the centre of Apple’s eye. Last November, in another earnings call, Cook had been asked specifically about the momentum being witnessed in India. He replied that they had set an all-time revenue record and growth was strong in double-digits. “It’s an incredibly exciting market for us and a major focus of ours. We have low share in a large market, and so it would seem there’s a lot of headroom there…we see an extraordinary market, a lot of people moving into the middle class, distribution is getting better, lots of positives. We put two retail stores there, as you know. They’re doing better than we anticipated. It’s still early going, but they’re off to a good start and I couldn’t be happier with how things are going at the moment.”
More Columns
Maha Tsunami boosts BJP, JMM wins a keen contest in Jharkhand Rajeev Deshpande
Old Is Not Always Gold Kaveree Bamzai
For a Last Laugh Down Under Aditya Iyer