Normally secretive, reticent and deliberate to a fault, Apple is pulling out all stops to woo the Indian market. Through, first, the Indian government.
In the last week of January, it sent a high-profile team of executives—local, regional and international—to meet ministers and government officials across the spectrum and seek incentives for its critical projects. Most notable among them was a blueprint to begin manufacturing iPhones in the country. The six-member team included, among others, Cupertino-based Priya Balasubramaniam, Apple’s vice-president of iPhone operations, Dheeraj Chugh, director of iPhone operations at Apple, and Ali Khanafer, Apple’s senior manager, government relations for the Middle East, India and Africa.
The trip and visit were on the back of a spectacular quarter for Apple in India, partly driven by the central government’s decision to demonetise 86% of the country’s currency in November. Faced with uncertainty and doubt over the future of cash held by them, many rushed to convert it into high-value durable items. Like iPhones.
This allowed Apple to ship in a quarter nearly a third of the 2.5 million units it sold last year, according to Counterpoint Research. Last year (ending March 2016) the company earned $1.5 billion in revenue (Rs 9997 crore), an increase of 54% from the year before, according to documents filed with the Ministry of Corporate Affairs (MCA).
But there might be another explanation for Apple’s urgency though—slowing sales in China, its second-largest market outside the US, where it faces three key challenges: rising labour costs, slow growth and a falling market share. According to IDC’s Quarterly Mobile Phone Tracker report, Apple saw a year-on-year decline for the first time ever in the Chinese market. Its market share fell to 11% in 2016 from 15% from a year ago, losing out to homegrown manufacturers like OPPO, Vivo and Huawei. In contrast, India represents a near-virgin, long-term opportunity for Apple, even if that’s partly because the company hasn’t really focused that hard on the country all these years.
After the January meeting, Apple’s Balasubramaniam was back in New Delhi in the last week of March, meeting finance ministry officials, including revenue secretary Hasmukh Adhia to discuss Apple’s India plans. The discussion, according to sources, was around the GST (a vastly simplified indirect tax system that is being implemented across the country shortly).
An Apple a day, ‘made in India’
Apple’s multi-pronged India strategy will roll out over the next 12 months. The first part is local manufacturing and integral to how Apple approaches India as a market to sell cheaper iPhones (read: older models). Apple’s manufacturing plan in India involves using high-level ‘assembly’—where its components are shipped from countries like Taiwan and China in a semi-knocked down mode and the local unit simply glues it up, in the Ikea mould.