Amidst a cluster of stores at Delhi’s popular IT and computer peripherals market in Nehru Place is eWorld, an Apple-authorised reseller. The store is desolate. A resigned silence combines with the white interiors to create an eerie, sterile emptiness. Even as one enters, the staff show no enthusiasm to push products. Their inertia is the result of how few takers there are for these high-end phones today. The response to the new iPhone models has been extremely disappointing, says a salesperson. However, he continues, the older models—iPhone 8 and 7—are seeing some traction.
The scene at eWorld is symptomatic of Apple’s struggles in India, where the world’s most profitable smartphone brand is going through an awful time. While its revenues grew 12% to Rs 13,097 crore ($1.87 billion) in 2017-18 and net profits doubled from Rs 373 crore ($53.46 million) to Rs 896 crore ($128.42 million) during the same period, volume growth leaves a lot to be desired. Smartphone research firm Counterpoint Research feels that Apple’s India sales could drop by as much as 25%, from an estimated three million units in 2017-18 to just two million in 2018-19. This would represent the first such slump in four years.
The bleak outlook, however, ends the moment you step out of eWorld. Its neighbours—multi-brand stores hawking the likes of Oppo and Vivo—are bursting with activity. Accordingly, Apple has seen its market share erode. From 2.5% of the overall market in the fourth quarter of 2017, its share has diminished to just 1% in the third quarter of 2018. Even in the premium smartphone segment (>Rs 30,000 ($429.9))—Apple’s traditional stomping ground—the company is now in the third position.
Whichever way you slice it, Apple is floundering in the world’s most attractive smartphone market. Enough so that even CEO Tim Cook took cognisance of the situation during Apple’s Q4 earnings call. At the time, he put the blame squarely on currency weakness. During the call, Tim Cook said that emerging markets—India, Turkey, Russia, Brazil—are where Apple is under pressure. “These are markets where currencies have weakened over the recent period. In some cases, that resulted in us raising prices, and those markets are not growing the way we would like to see.”
But given that other brands continue to move from strength to strength, the rot for Apple clearly runs deeper than just currency weakness. Increased competition, a lack of focus, government regulations, and Apple’s confused approach to marketing and sales have left it on the ropes.
With its second country head in the last three years on his way out, Apple is hoping that Nokia veteran Ashish Chowdhary can revive its flagging fortunes. Chowdhary will take the reins of Apple India once 2018 draws to a close, but with its fortunes in a nosedive, he faces an uphill task to turn things around.
The most obvious reason for Apple’s woes in India is the influx of competition. Chinese competition, in particular. Even as Apple tries to halt its slide, its Chinese rivals have taken the Indian market by storm. According to Counterpoint’s third-quarter smartphone market report, Xiaomi is firmly in control of the overall market. It has a 27.3% market share compared to Apple’s 1%. OnePlus has even wrested control of the premium market which Apple had dominated scarcely a year ago. OnePlus currently controls 30% of the premium market, followed by Samsung at 28% and Apple at just 25%.
The success of Chinese smartphones in India is, at its heart, a simple matter of cost. Take Apple, for instance. Karn Chauhan, an analyst at Counterpoint says that older iPhones account for a majority of Apple’s 25% share. “The new iPhones would barely be 5-10% because they were launched pretty late in September… For the fourth quarter also, we do not expect new iPhones to be a big percentage because of their price point,” he says.
For a country where ‘premium’ is a recent phenomenon—premium phones account for just 3% of the market—Apple’s latest lineup of iPhones are out of place. The iPhone XS, XS Max and XR all fall into the premium plus category, a segment that does not even exist in India. Both the iPhone XS and XS Max cost Rs 1 lakh ($1,433.30) and above, while the XR costs Rs 76,900 ($1,102.21).