Apple's top of the pyramid fortune

After years of low single-digit sales of the iPhone in the country, Apple's growth story in India seems to be taking solid shape. The Cupertino-based tech giant sold a total of 3.2 million units in its fourth quarter in the country, a 34 per cent increase from last year, according to market research firm Counterpoint Research. For the whole of last year, the brand shipped 5.4 million iPhones in the country. These are Apple's biggest numbers for iPhone sales in India yet, and with good reason. Despite having been declared the world's most popular smartphone brand in the fourth quarter of last year, Apple has struggled to get the Indian market to see past its high price point, especially in a competitive industry.  

    Source: Canalys

The brand has been making strategic inroads into the country, even as it looks intent on retaining its high price exacerbated even further with tariffs. Ironically, this has ended up working in Apple's favour. The company brought in more revenue with approximately Rs. 15,651 crore or USD 2.09 billion, edging past Samsung, which generated USD 2 billion or roughly Rs. 14,976 crore despite comparatively lesser sales than segment leaders like China's Xiaomi, which sold 9.2 million devices, and South Korea's Samsung, which sold 7.2 million devices. Industry experts estimate that this pushed Apple's India revenue beyond Rs 30,000 crore for the first time. 

           Source: Counterpoint Research

Pandemic 

Data from Counterpoint Research showed that in the fourth quarter of 2020, iPhone sales in the Indian market almost doubled. Even though the brand stood sixth in the Indian market, it saw YoY growth of 171 per cent and a 93 per cent YoY growth in 2020. The report reasoned that the brand's aggressive pricing offers on the iPhone SE 2020 and iPhone 11 were behind the growth. Apple's discount scheme usually follows a pattern where it offers heavy discounts on its previous model when a new model is released. The brand exceeded 1.5 million shipments in one quarter for the first time in India. 

The slow pivot was accelerated by the pandemic. Indian consumers often sourced iPhones from abroad either when they travelled or when their relatives visited them. The percentage of Apple iPhones that were bought from foreign markets dropped due to a complete ban on travelling. This fed a pent-up demand in the Indian market in the second half of 2020. 

Another offshoot of the pandemic was that consumers were cooped indoors, as a result of which, they could afford to spend a bigger portion of their disposable income on an iPhone instead of going out or on holiday. "We believe this growth is a result of factors like aggressive promotions, due to lockdown limited opportunities for a customer to spend on luxury items like expensive clothes, parties, and vacations, who end up spending on accessories," Pavel Naiya, research analyst at Counterpoint, told Quartz. 

The brand also launched its online store in India in September 2020. Last year, CEO Tim Cook stated that the online store had contributed significantly with helping double its smartphone share in India to 4 per cent by the end of 2020.

              Source: Statista

Ramping up local manufacturing 

In April this year, the Tim Cook-led company announced that the flagship manufacturing facility for its iPhone 13 model would open in the Foxconn plant near Chennai. Apple now manufactures all its top-selling models other than its Pro versions locally through Foxconn and Wistron, its manufacturing partners in India. While Wistron and Foxconn fall under the PLI scheme, the third one, Pegatron, which will start manufacturing soon, also falls under PLI. 

The company closed with exports of Rs. 10,000 crore at the end of last year. Considering it has been a part of the PLI or production-linked incentive scheme for just one year, it is a remarkable feat. Apple also managed to meet 75 - 80 per cent of its total demand in the country through domestic production itself. This is in comparison to the 10 - 15 per cent of the demand it could fulfil until last year.  

Opening retail stores

The brand also fell behind in opening its retail stores in the country due to a regulation that required retailers to source at least 30 per cent of its raw material locally. It was only in 2019 that Apple started assembling the iPhone 7 at Wistron's Bengaluru unit. Apple currently has two retail stores in the works. The brand is hiring more for its flagship store in Mumbai and plans to open it in the second half of this year. 

Apple’s country-wise market segmentation, Source: Statista

Customer-centric marketing campaign

Prachir Singh from Counterpoint Research says, "Apple's marketing campaign has evolved into a more aggressive and customer-focused one. Their tie-ups with both Flipkart and Amazon during the festive season have been a huge reason for their growth. Last Diwali, the iPhone 12 was selling on Flipkart while the iPhone 11 was being sold on Amazon at the same time." While pricing has always been the contesting factor in the Indian market, Apple seems to have figured out a way to somewhat circumvent it with fresh financing strategies, Singh says. E-commerce platforms offer EMIs, the Buy Now Pay Later option, as well as bundling services now. And all this is aside from heavy discounts. Last year, Flipkart offered a flat Rs. 15,000 discount. Although, admittedly, Apple isn't the only smartphone brand to have adopted this, other brands have also moved toward this trend. 

"It's not just online sales; Apple has also been able to leverage sales from offline stores," Singh says. Apple ramping up local manufacturing plants in the country has made it easier for it to offer heavier discounts. Local manufacturing is one area where the phones lose 20 per cent of their taxes before selling them to end-users. "India wasn't really a strategic market for Apple earlier, but things have changed now. Their focus on the Indian consumer has shifted, and it is showing," Singh states.