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Bloomberg's Myopic View of Apple in India is as gloomy as it gets

1 Cover India smartphone market owned by Android


Apple is in India for the long haul, even if it looks like they're not taking India very seriously on paper at the moment. Even if they continue to lose executives in that country and appear to have lost any chance of winning concessions from the government due to Samsung's latest mega plant and local supply chain that contradicts Apple's negotiation position. And its' little Xiaomi that has been battling it out in India for top spot with Samsung since Q4 2017, not Apple.


One of Bloomberg's latest reports rubs it an Apple's face that they've been completely irrelevant in India and after years of being in that country only holds a lowly 1% of the market.


2 Apple in India chart aug 2018 counterpoint  bloomberg reports

At times you have to wonder why Apple wants to be in India at this point in time. According to Wikipedia, "India's per capita income (nominal) was $1670 in 2016, ranked at 112th out of 164 countries by the World Bank, while its per capita income on purchasing power parity (PPP) basis was US$5,350, and ranked 106th."


Even if you disregard these stats because 65% of the country is rural, the fact is that if you look at a larger city like Delhi, the income per capita is still only US$5,300 (2016 to 2017). In 2016 the USA GDP per capita was $57,466; In Canada it's $43,420; In China 15,500 PPP dollars (purchasing power parity).


While it's thought that the middle class in India is tiny, according to the stats, there are 267 million in India considered middle class with this number to leap to 547 million in that country. Yet no matter how you juggle the numbers, India's per capita is well below that of China at the moment, making Apple's iPhone price points still a little hard to sell.


Traditionally Apple aims for the middle class market that tends to choose higher end brands. However, the majority of consumers in India choose a smartphone purchase primarily based on price and currently, according to Bloomberg's report, that price is roughly 10,000 rupees or US$150. Apple's lowest priced iPhone model is twice that amount.


3 apple sales in India

Gene Munster, the co-founder of Loup Ventures is a huge fan of Apple and yet he told Bloomberg that Apple has "largely failed in India, despite comments from the company that they will see more progress. I suspect we're three years away from Apple highlighting major growth in India."


Bloomberg's report further noted that "Apple hopes to start opening stores in India next year and eventually set up three in New Delhi, Bengaluru (formerly known as Bangalore), and Mumbai, according to the people familiar with the company's plans."


This could be the beginning of rebuilding their brand in India and professionally selling Apple products to consumers and businesses.


Yet Bloomberg points out that "None of this will make much difference if Apple doesn't understand its customers. For years, Indian consumers have complained that Siri can't process their requests in local languages, they have no access to Apple Pay, and Apple Maps can't give them turn-by-turn directions or identify points of interest."


While Bloomberg's report on Apple in India paints a gloomy picture, and perhaps rightfully so short term, Apple is taking a longer-term approach to India and from the outside it may very well look like Apple is at a standstill.


For now, the noise in the headlines from Bloomberg and others that Samsung and Xiaomi are "stomping" on Apple in India, is meaningless.


Even with Samsung holding on to being the #1 smartphone leader in India, it's done absolutely nothing to help their bottom line. In contrast, Apple has just become the first trillion dollar valued company. Apple got there by understanding that it's important to sell a quality product at a profit and not by chasing the profitless "volume" strategy that market analysts continually cheer on.


Apple's new strategy of keeping older smartphone models alive and moving them down their product line every year is helping them begin to become competitive at lower price points in various markets around the world such as China.


That's why Gene Munster's honesty is likely the closest to a realistic forecast for now. Apple will get more competitive at the middle point in India's price curve in that time frame while continuing to build the upper end of that market.


In time Apple will carve out a healthy profitable and sustainable model in India. They will never try to be a volume leader in a country where its GDP will continue to be at the lower end of the range for decades to come. Yet in a country with a population of 1.34 billion, a healthy niche of 134 million fans or 10% of the population over time is still four times the entire population of Canada.


The bottom line is with Apple's success of crossing the trillion dollar valuation, there will always be publications willing to take a crack at Apple for short term gain. While Bloomberg's myopic view of Apple in India is as gloomy as it gets, in the bigger picture, it's of no consequence.


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