With sales in China down, Apple looks to India for growth
Apple CEO Tim Cook blames the problems in China on the extremely successful launch of the Apple iPhone 6 and Apple iPhone 6 Plus in 2014. Apple had just increased the iPhone screen to 4.7-inches, and introduced its first 5.5-inch phablet. Chinese consumers went gaga over the larger screened phones and sales peaked that year. Apple expected sales in China to continue at the same level, but when upgrade rates returned to average, Apple had too much inventory in its Chinese sales channels.
While Cook is still bullish on China, Apple is looking hard at India. The problem there is that while the country is the second largest smartphone market, the average Indian makes less than $3.10 USD a day. 70% of the smartphones sold in the country last year were priced under $150. Thus, it is no surprise that at $300, the Apple iPhone 5s is the company's top seller in India. Cook notes that iPhone sales in India rose 50% in fiscal 2016. While India's GDP is rising, the CEO says that this is not a precursor for strong iPhone sales in the region thanks to a growing middle class.
Apple hoped to improve its visibility in the country by opening Apple Stores in India, but India's laws require that 30% of such a store would have to contain products locally sourced. In addition, Apple has been shot down with its requests to sell refurbished models in India. Earlier this year, analyst Gene Munster said that Apple could add 62 million iOS users in India by bringing its presence in India to the same level it is in China.
Apple also announced today that it is entering into a deal with Indian carrier Reliance Jio. The latter is looking to build 4G networks in 18,000 Indian cities and 200,000 villages. Apple iPhone buyers in India will get a free year of service from Jio.