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Apple Slowly Improving in India, but Affordability Remains a Concern

by Juha Winter | Jan 12, 2017

As we draw closer to the reporting season for Q4 2016, let’s take a look at Apple in a key growth market – India. To be sure, for just about any major smartphone vendor, India is one of the most important markets because of its huge and growing population as well as high growth potential for smartphones. The latter is in particular due to the low but rapidly increasing smartphone user penetration that was below 20 percent in 2016, measured as the percentage of the population owning a smartphone, according to recent Strategy Analytics research. While much of the world suffered from slowing smartphone sales particularly in the first half of 2016, India’s smartphone market has grown consistently by 14 to 19 percent year-on-year in each quarter from Q1 to Q3 2016. It comes as no surprise then that India is expected to overtake the US in terms of total smartphone shipments at latest by next year.

Looking at Apple, the company was struggling in India in Q2 2016 when its iPhone shipments fell by a staggering 35 percent YoY. This was evident in the slumping sales of the iPhone 6s, the flagship that had begun volume shipments in India just two quarters earlier in Q4 2015, barely making it to the top-50 list. The old but affordable iPhone 5s actually performed quite well in terms of sales but was no match for Samsung’s best-selling models as well as a surprise hit from Xiaomi, the Redmi Note 3. The rest of the top-10 model list was rounded by prolific local vendor Micromax and Lenovo-Motorola, as reported by our Smartphone Model Tracker (SMT) service.

In Q3 2016, taking into account the quarterly seasonality of sales, Apple swung back up in India, although there was still a slight drop in iPhone sales in YoY terms. As part of their fiscal Q4 2016 reporting (for the three months that ended September 24, 2016), Apple said that the rest of Asia Pacific, which excludes greater China and Japan but includes India, had recorded a 13 percent sequential rise. Despite some speculation that India contributed significantly to that rise, SA research estimated a slight sequential dip in the order of 10 percent. Our SMT data on India in Q3 2016 show that the iPhone 5s and 6 continued to perform reasonably well, but the iPhone 6s fell further behind in the ranks.

The above clearly has to do with affordability, as many retailers have been emptying their inventory for the phased-out iPhone 5s, often giving attractive discounts for the device. Similarly with the iPhone 6, early September saw Apple retailers drop the prices for the old iPhone 6 device line-up, ahead of the launch of the iPhone 7 / 7 Plus, which happened on Oct 7, 2016 in India. The smaller form factor iPhone SE did not outperform the iPhone 6 in India, which is likely due to pricing (the SE is more expensive than the 6) but also the small screen. Roughly half of the smartphones sold in India already have a screen that is larger than 5 inches, making the 4-inch iPhone SE appear somewhat small, also in comparison to the iPhone 6. This leaves little incentive for new iPhone buyers to pick the SE, and owners of the iPhone 5s and 6 won’t probably see it as a worthy upgrade.

So what can we expect for Q4 2016? The final quarter of the year has traditionally been the strongest for Apple in India, particularly so for Q4 2015 when Apple shipped well over a million iPhones in the country, and the new iPhone 7 / 7 Plus should help drive up demand from early adopters and those who are less financially constrained. At the same time, attractive discounts for the old iPhone 5s, and to an extent, the iPhone 6 have likely contributed positively to the sales of these models ahead of the holiday season. The price gap between the iPhone SE and 6 has narrowed to around 2,500 INR or US$37 as of late, however, but the SE is still rather expensive compared to devices with similar or better specifications, limiting its appeal.

Affordability and price sensitivity are key concerns in India, and while Apple’s brand has traction in the country, for many the newer models are simply too expensive, particularly in comparison to Chinese and local vendors’ products, and market leader Samsung has a strong, affordable model line-up in the country as well.

Interested in staying on top of the smartphone market in India with superior model-level detail? Our quarterly SMT report series includes the shipments and market share of the top-200 best-selling smartphones in India. The whole service itself covers 88 countries across 6 principal regions.

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