Apple's thousand year plan for India

Apple's in it for the long haul...

With developed economies facing political and economic crisis, Apple’s decision to focus on emerging economies makes absolute sense as the company seeks to maintain growth. It has already seen significant success in China, but its attempts to expand its business in India have so far been thwarted by local economic policy.

Apple’s response

India demands that 30 percent of the components used in consumer electronics sold in the country be sourced domestically. That kind of makes sense, given that lack of that kind of economic policy in other developed economies has transformed these into low paid service industries, but for Apple the challenge is that the majority of its products are manufactured in China.

Apple is now speaking with India’s government in search of suitable incentives that might enable it to move some of its manufacturing to the country.

These moves come as Apple continues to make significant investments in R&D and iOS development centers in key markets worldwide, from Japan to China, Italy, India and beyond. In India these investments mean it intends employing 4,000 people in its new Hyderabad Maps development facility.

Apple has also made several attempts to convince the nation to lift its manufacturing restriction, has unsuccessfully sought to sell used iPhones and will soon begin opening Apple retail stores.

Apple’s manufacturing partner, Foxconn, was previously reported to be building a factory in India’s Maharashtra. Today’s report suggests Apple plans to be a part of this development.

The big plan

Speaking in July, Apple CEO, Tim Cook, said: “India is now one of our fastest growing markets. In the first three quarters of this fiscal year, our iPhone sales in India were up 51 per cent year-on-year.”

This continued into the just gone quarter, when Cook confirmed sales in the country grew by more than 50 percent, year-on-year, Cook said during his recent fiscal call.

"Our iPhone sales in India were up over 50 percent in fiscal 2016 compared to the prior year, and we believe we're just beginning to scratch the surface of this large and growing market opportunity," he said.

"The truth is there's going to be a lot of people there and a lot of people in the middle class that will really want a smartphone, and I think we can compete well for some percentage of those. And given our starting point, even though we've been growing a lot, there's a lot of headroom there in our mind. So, we're working very hard to realize that opportunity," he explained.

Beyond iPhone

The challenge for Apple is that the average smartphone expenditure in India is around $150 while the iPhone SE costs c.$600.

However, while some analysts think the relatively high price may limit Apple’s impact in the market, Cook seems to believe that delivering great value added packages may change the pattern. (He hasn’t said so overtly but did mention the recently announced free 4G access deal with Reliance Jio.)

The tendency to see Apple’s adventures in India as a zero sum game based around iPhone sales is mistaken. Apple has a big presence in many different sectors in this post BYOD enterprise tech age, so it's worth considering its local business potential, given that the $100 billion Indian software services industry employs around 3 million staff and is forecast to grow at 13-15%.

in the end, Apple's long-term future is not going to be defined by the next 13-weeks of iPhone sales, whatver more short-sighted analysts may believe.

A thousand years

The challenges Apple faces in developing its business in India are unlikely to shift overnight, but it is in position to invest time and money in developing its presence there, particularly given the Android industry has begun consuming itself.

“We’re not here for a quarter, or two quarters, or the next year, or the next year,” Cook recently told NDTV. “We’re here for a thousand years.”

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Copyright © 2016 IDG Communications, Inc.

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