Apple and India: A Classic Bollywood Romance
Even when the world was touting India as the ‘next big thing’, Apple didn’t oblige. But now times may be changing.
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Steve Jobs once said to his biographers, “We weren’t going to find a place where we could go for a month to be enlightened. It was one of the first times that I started to realise that maybe Thomas Edison did a lot more to improve the world than Karl Marx and Neem Kairolie Baba put together.”
In the ensuing years, Jobs stuck to a similar narrative about India, at least in his actions (or inactions).
Apple’s Stepmotherly Treatment of India
When the whole world was looking towards India as the ‘next big thing’, Apple didn’t oblige. Delayed product launches, unkept promises, and higher prices were commonplace. Over the years, the Indian consumer couldn’t be blamed for feeling like Apple’s neglected stepchild. Apple Maps doesn’t offer directions or turn-by-turn navigation. Siri, iPhone’s personal assistant doesn’t offer restaurant reservations or movie information to Indian consumers. Apple Pay has still not been launched.
The iPhone SE Disappointment
Apple loyalists in India believed all of this would change with the global launch of the iPhone SE in March this year – a cheaper iPhone with a smaller screen ostensibly targeted at emerging markets. But, on March 21, India’s Apple fanboys were left heartbroken yet again. At the Apple Keynote event, where the phone was launched at $399, India didn’t feature in the list of countries where the phone would be made available first. To make matters worse, the phone was nearly $150 more expensive in India than in the US!
A month later, Apple was making headlines for all the wrong reasons. The company had posted its first ever decline in iPhone sales and the company’s sales numbers had dropped majorly in one of its key markets, China. This time India served as a beacon of hope for the technology behemoth. iPhone sales in India had grown 56 percent in India in January-March quarter. India’s neglected Apple fanboys were making themselves heard.
Apple Finally Turns to India
And that’s when Apple shifted focus to one of the world’s fastest growing smartphone markets. The company played its wild card and shipped its love to India through the captain of the ship himself – Tim Cook. This visit was the first for an Apple CEO and everyone wanted some face time (pun intended) with Cook.
During the course of his visit in May, Apple launched a development office in Hyderabad focused on map development and an app design and development accelerator in Bengaluru. But that was merely a friendly overture from the tech giant. During his visit, Cook met with Prime Minister Modi, politicians, businessmen, bankers, Bollywood stars and yes, he also attended an IPL match!
Cook is aware that the potential for growth in India is immense, especially considering the imminent pan-India launch of 4G services. During an earnings call in April, he said, “It is already the third largest smartphone market in the world. But because the smartphones that are working there are low-end, primarily because of the network and the economics, the market potential has not been as great.”
Cook also believes India is today where China was seven to ten years ago. While that’s a fair assessment, the Indian consumer is still extremely price conscious. If Apple were to launch a truly ‘budget’ iPhone tailor-made for India, it could compromise its premium brand image and possibly reduce its profits to Android or nada levels!
This is what seems to have prompted the company to submit a proposal to the Indian government to sell refurbished iPhones at heavily discounted prices. Apple has tried this model in other markets. It basically entails returning used iPhones to Apple, which are then tested, certified and then sold to customers with a new warranty. This sounded like quite the plan, to get things started in India.
However, recently at a press conference, the Commerce & Industry Minister Nirmala Sitharaman quashed the plan.
That’s just strike one. The bigger setback came when it sought to set up its own stores in India without complying with the local sourcing norms.
Govt Unlikely to Relax Sourcing Rules For Apple
For such a waiver, a company must show that its products represent ‘state of the art’ or ‘cutting edge technology’. However, both terms are still to be defined by the government.
Earlier, the Foreign Investment Promotion Board (FIPB) had said that Apple doesn’t qualify for an exemption and must procure 30 percent of components locally if it wants to sell through its own retail stores in India.
Sitharaman also mentioned that her ministry had recommended Apple’s case to the Finance Ministry, but that was later rejected.
Devraj Singh, Executive Director, tax and regulatory services at EY India explains,
Talks between the two ministries are still on. That said, granting Apple the exemption it seeks is a tricky proposition for the Indian government. If the government were to grant a waiver, it could set a precedent for other companies looking to launch single brand retail stores in the country. Last month, Xiaomi withdrew its request for exemption from the 30 percent sourcing rule, a move that’s being viewed as a boost for the government’s ‘Make in India’ campaign. Chinese mobile company LeEco is still reportedly seeking such an exemption from the Indian government.
Counterpoint’s research director, Peter Richardson says, “Apple stores do offer a flagship experience. However, sales through physical flagship retail, assuming they can be established, would likely be only a small percentage of Apple’s overall sales. Authorised resellers and, potentially, Apple online stores would likely also be a part of the retail mix.’’
The flagship experience that one enjoys at Apple owned stores, say in New York or San Francisco is another thing that Indian customers have been missing out on. In India, Apple sells its products through authorised resellers like Redington India. An Indian consumer paying nearly $700 for a phone expects a refined, world class shopping experience. Instead, all he gets is an ordinary shopping experience no different from the other brands selling their products on Indian store shelves.
Tim Cook’s visit has thrown up more questions than answers. Will the government eventually warm up to the idea of Apple selling refurbished iPhones? Will Apple be permitted to open its own branded stores in India without actually ‘Mak-ing in India’? Apple is finally wooing India in earnest, but the biggest question is – will India continue playing hard to get?
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)