Apple’s first physical retail store is situated within the populous city of Mumbai.
Punit Paranjpe | afp | Getty’s paintings
Tim Cook has been optimistic about India for years. Now it’s betting on an enormous from South Asia Apple shifts its focus from China and expands its presence in India.
Still, analysts told CNBC that the iPhone maker’s dependence on China would remain for years.
There is potential for India to “change into the subsequent China” for Apple manufacturing, nevertheless it may very well be as much as a decade before that happens, said Martin Yang, senior analyst of recent technologies at Oppenheimer & Co.
Apple is set to open its second retail store in India on Thursday in Delhi, two days after opening its first in Mumbai.
The Cupertino-based tech giant continues to have a robust foothold in China with supply chain partners, and China’s infrastructure capabilities are still significantly better than what India can offer, Nitin Soni, senior director of Fitch Rankings, told CNBC.
“Apple will take years to diversify outside of China,” Soni said. “The country is still a really big pocket for Apple – not only within the assembly line, but in addition within the semiconductor ecosystem and testing.”
Apple’s efforts to maneuver product assembly out of China have change into more urgent over the past five years as trade tensions between the US and China intensified and provide chain disruptions brought on by Beijing’s Covid-19 Zero Policy resolved. The iPhone maker needed to cut production in China due to these restrictions, hurting its bottom line.
Population growth and clean opportunities around India are the golden goose for Apple.
Dan Ives
Wedbush Securities
It is also highly unlikely that Apple will have the opportunity to completely eliminate its dependence on China, said Navkendar Singh, vice chairman of International Data Corporation (IDC) India.
“Given the dimensions of costs, logistics and sheer inertia of some suppliers within the ecosystem in China, it is not possible that Apple could completely remove itself from China,” Singh stressed.
Nevertheless, Apple’s development in India has only just begun and various opportunities await it in each manufacturing and retailing within the country.
Apple’s ambitions for India
In line with IDC, India is the second largest smartphone market on the planet when it comes to annual shipments and sales, accounting for nearly 12% of the worldwide market.
In line with a market research firm, Apple shipped 6.7 million iPhones in 2022 from India, up from 4.8 million units in 2022. It ranks sixth after the US, China, Japan, UK and Germany for global iPhone shipments in 2022. .
“Population growth and pure opportunity in India is the golden goose for Apple. It has been difficult to capture Apple’s market on the iPhone front for years, nevertheless it’s clearly starting to achieve momentum now,” Dan Ives, an analyst at Wedbush Securities, said.
Now a tech giant manufactures between 5% and seven% of its iPhones in India, a jump from just 1% in 2021.
“China and the USA, together with Europe, remain the center and lungs of Apple’s story, with India set to change into the highest five markets Apple is specializing in. High hopes that India may very well be the primary driver of Cupertino’s growth in the approaching years,” Ives told CNBC by email.
Although the Indian government said in January that Apple intended to fabricate 25% of all its iPhones in India, Ives said that was a “lofty” goal and that reaching 10% to fifteen% of production seemed more realistic in the long run.
India may also proceed to play second fiddle to Vietnam within the production of more sophisticated products resembling MacBooks, but smaller products resembling Apple smart watches and AirPods will soon be manufactured in India, Singh said.
There is such a concentration of the market in city centers, with Delhi and Mumbai “accounting for nearly 1 / 4 of Apple’s market [in India]said IDC’s Singh, adding that more physical stores could open by mid-2024.
The growing middle class in India
IDC data showed that Apple has only 5% of the market share in India, as lower to mid-priced devices proceed to be essentially the most preferred by consumers.
Nonetheless, growing adoption of the technology within the country and greater consumer purchasing power will generate higher iPhone sales, Fitch’s Soni said.
“We see the center class becoming more affluent and moving towards the upper middle class, with customers buying flagship smartphones,” said Soni. “It also helps that 4G is now available throughout India.”
But cheaper labor costs in India won’t bring down the price of Apple iPhones as customers could be willing to pay higher prices for Apple products, Singh said.
He said Apple wouldn’t reach the “mass market price point”. “It stays a premium brand and they’d love to maintain that brand halo in place.”
Singh added that the corporate may as an alternative offer banking programs or ties to make the products cheaper.
— Arjun Kharpal of CNBC contributed to this report.