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Apple belatedly makes push in India

India Dispatch: Despite the effect that India had on Steve Jobs, the country was not a market that Apple focused on at all during his lifetime.

Apple is trying to make its smartphones cheaper in India through a rebate scheme. Noah Seelam / AFP
Apple is trying to make its smartphones cheaper in India through a rebate scheme. Noah Seelam / AFP

Steve Jobs, the late founder and chairman of Apple, spent seven months travelling in India when he was 19.

The trip had a profound influence on the young Jobs, a college dropout who went on to build one of the world's biggest and most innovative technology companies, and years later he cited the experience as something that shaped his approach to business.

"The people in the Indian countryside don't use their intellect like we do. They use their intuition instead," Jobs was quoted as saying in an authorised biography by Walter Isaacson. "Intuition is a very powerful thing, more powerful than intellect, in my opinion. That's had a big impact on my work."

Despite the effect that India had on Jobs, the country was not a market that Apple focused on during his lifetime, with advanced economies and China favoured to push sales of its sleek, pricey products, including the iPhone and iPad.

A shift has only recently started to take place, with Apple trying to drive sales of its iPhones in India and take market share from its competitors in an effort to catch up.

It has created deals in India to help make its smartphones more affordable, launching a scheme this month that offers at least 7,000 rupees (Dh476) for a buyer's existing smartphone if they purchase the iPhone 4, one of its older models. That has reportedly resulted its iPhone 4 sales outpacing sales of the newer iPhone 5 model in India. Apple's rival Samsung quickly fought back, bringing out a promotion for 15 per cent cash back on its Galaxy products, splashing its adverts on the covers of newspapers, just as Apple had.

Just months ago Apple appointed two distributors, Ingram Micro and Redington, to sell its iPhones across India and help it reach more customers.

It is also offering plans that allow buyers to pay in instalments. The company is advertising aggressively in the country and launched its iTunes store in India in December.

"Clearly what you are seeing is while there was no focus on India in the past by Apple, suddenly there has been a shift in coming to India," says Amit Goel, the chief executive of Knowledgefaber, a consulting and research firm based in Bangalore.

"They're bringing some of their older products into that sweet spot where customers buy them," he adds.

Having experienced an iPhone, a customer is more likely to then go on to buy another Apple product such as an iPad or MacBook.

"I think Apple is counting on bringing a lot of customers in countries like India who can't pay for the iPhone 5, really get them hooked on to the lower-end products, which are selling at cheaper rates with all the offers that are going on. The basic concept that Apple has seen that once you bring a customer into the Apple ecosystem, they won't really leave them," Mr Goel says.

"Given that they are facing a lot of issues with the market share going towards Android, they definitely wanted to participate in the middle and lower end of the market as well," he adds.

The smartphone market in India surged 48 per cent to 16.3 million units last year from almost 11 million units in 2011, according to figures from International Data Corporation (IDC), which is also forecasting sharp growth for this year. "When you see these kind of numbers here, you want to participate in the market," says Mr Goel.

Tech geeks had long complained that Apple's products were too expensive in India, selling at higher prices than elsewhere in the world and with launches of products taking place months after they had appeared in other markets.

"For Apple, the other thing which was happening was that there were a lot of people who were buying Apple products abroad and bringing them into India," says Mr Goel. "The grey market was developing really fast."

Apple's latest smartphone, the iPhone 5, is priced at 45,500 rupees in India, which is slightly higher than what it sells for in the United Kingdom. Its Indian launch was just over a month after its release in the United States.

The aggressive push could lead Apple's total shipments into India to more than double this year, according to analysts.

Apple shipped about 350,000 units to India in 2011, which rose slightly to 450,000 in 2012, helped by a strong performance late in the year, according to data from Canalys, a consultancy based in Singapore.

"But with its continuing efforts in India, we expect Apple should be able to reach 1 million unit shipments in 2013," says Jessica Kwee, an analyst at Canalys.

IDC says that Apple experienced substantial growth in the fourth quarter of last year.

"Apple's India shipments saw a sudden surge [in the fourth quarter], sending it to the second spot in terms of revenue in the overall smartphone market," IDC said. "The surge in shipments can be attributed to the channel restructuring and the launch of iPhone 5 in 2012. With the newly appointed national distributors, Apple reached out to a consumer base bigger than ever before."

The numbers are still relatively small, however. Apple managed to take a share of almost 16 per cent of the Indian smartphone market during the fourth quarter, but it is still a long way behind Samsung, which controls almost 40 per cent of the market, according to IDC.

"I believe there are various reasons why Apple has lagged behind in India," says Ms Kwee. "First of all, the general income level in India means that most people could not afford to buy Apple products. Therefore Apple's market was limited - and this caused Apple to not prioritise India in its decisions, say, allocation of inventory of new products. Also the other competitors seized the chance to attack the market, at all price categories."

It is difficult for Apple to continue to ignore the potential of the market in India, with a population of more than 1.2 billion and a growing middle class.

"I believe the main reason is that Apple is looking for other avenues for growth," says Ms Kwee. "Its shipments will start to stall soon as the markets are saturated with Samsung and Apple products in many markets. And India is one of the markets which so far has been underpenetrated with smartphones, despite its huge potential."

 

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