Another new store, another CEO meeting with Modi, what does Apple want in India?

Can Apple succeed in India if it continues to increase its weight?

Media analysis pointed out that Cook's trip to India this week proves that India has become Apple's next strategic priority.

Another new store, another visit to Modi, why does Apple attach so much importance to India?

Seeing the potential of the Indian market

India is Apple's largest market yet, which means it's crucial for Apple, which is struggling with revenue.

On the one hand, India is the second largest smartphone market in the world and one of the fastest-growing markets, but smartphone penetration is still less than 50%, which allows Apple to see growth potential.

Apple's sales in fiscal 2022 in Chinese mainland, Hong Kong and Taiwan were $74 billion, accounting for about 18% of Apple's total revenue in the same period.

India and the rest of the Asia-Pacific region, referred to as "other Asia-Pacific" in the financial report, have sales of only $29 billion in fiscal 2022, just over one-third of China's sales, and the gap between the two is huge.

Angelo Zino, senior analyst at CFRA Research, said Apple's revenue in India has a lot of room to rise:

Apple's share of the smartphone market in India is less than 5%, while in China it is about 18%. Consumers in both countries tend to use Android phones.

I think as Apple starts to focus more and more on the Indian market, it will give the company higher revenue growth potential.

Wall Street News previously mentioned that in recent years, Apple has been difficult to break the monopoly position of Android phones in India, the most important reason is the price:

According to Canalys, the average Indian smartphone sold for $206 (excluding tax) last year, while the average iPhone sold for $898 and the entry-level iPhone SE retailed for $429.

To address the problem, Cook said in February that Apple in India would also allow customers to buy phones in installments and offer trade-in discounts.

On the other hand, Apple's layout in India has begun to bear fruit, and the media said that as of the end of March this year, Apple's revenue in India increased by nearly 50% year-on-year compared with the previous year's $4.1 billion, and its importance is becoming increasingly apparent.

In a results call in early February, Cook revealed that Apple had set a "quarterly revenue record with very strong year-over-year growth" in India, but did not disclose specific figures.

Build a manufacturing base in India

Due to India's strict regulations prohibiting international brands from opening their own brand stores, unless most of the brand products come from India, Apple has laid out a number of industrial chains in India to further increase the Indian market.

At the end of September last year, Apple confirmed that it would assemble the iPhone 14 in India, which is the first time that India will produce a new iPhone in the first year of its launch.

Soon after, in early October last year, the media said that Apple was seeking to move some of the production of AirPods and Beats headphones to India for the first time. In December, the media said that Apple was considering producing some iPad models in India.

In January, the media said that in the past fiscal year from April to December last year, Apple exported more than $2.5 billion of iPhones from India, almost double the total exports of the previous fiscal year.

That month, India's commerce and industry minister, Piyush Goyal, said Apple already produces 5 to 7 percent of iPhones in India, and the company aims to increase that to 25 percent. That is, a quarter of the iPhones in the future will be made in India.

In early March, it was also reported that Apple foundry Foxconn was expanding production in India. Some media said that Foxconn will invest $700 million to build a new factory in India, which may be used to assemble iPhones or produce parts for Apple's emerging electric vehicle business.

Subsequently, media sources said that India is occupying an increasingly important position in Apple's development plan. In addition to favoring India in terms of diversification of production bases, Apple also pays more attention to the performance of the Indian market.

Apple's predicament in India

In fact, since 2016, Apple has begun to layout the Indian market, but it has been difficult to occupy a place.

Android has such an unassailable dominance in India that it has been fined $160 million.

What's more, for U.S. tech companies, are concerned about whether the Indian government will restrict foreign companies' access to the country's market, citing data protection, as well as impose more antitrust penalties and regulation on these tech giants.

Another problem is India's lack of a highly specialized workforce. Although India is poised to overtake China as the world's most populous country, its information technology sector employs only about 5 million people.

Meanwhile, Apple's efforts to expand production in India have frustrated. One of Apple's suppliers, Tata Group, India's largest conglomerate, operates a factory in Hosur, India, where only one out of every two parts on the production line is in good condition and can eventually be sent to Foxconn for assembly.

That is, the yield rate of the above factory is only 50%, which is far from the almost zero defect goal that Apple expected. According to sources, the plant is working on plans to improve proficiency, but there is still a long way to go.