Steve Jobs once said to his biographers, “We weren't going to find a place where we could go for a month to be enlightened. It was one of the first times that I started to realize that maybe Thomas Edison did a lot more to improve the world than Karl Marx and Neem Kairolie Baba put together.”
Source - “iCon Steve Jobs: The Greatest Second Act in the History of Business”
In the ensuing years, Jobs stuck to a similar narrative about India, at least in his actions (or inactions). Even when the whole world was looking towards India as the ‘next big thing', Apple didn't oblige. Delayed product launches, unkept promises, and higher prices became commonplace. Over the years, the Indian customer couldn't be blamed for feeling like Apple's neglected stepchild. After all, if you're shelling out more than a month's salary on a smartphone, you're entitled to expect sheer luxury in return. Sadly, that hasn't been the case with iPhones in India. Apple Maps doesn't offer route directions or turn by turn navigation. Siri, the iPhone's personal assistant doesn't offer restaurant reservations or movie information to Indian customers. Apple Pay has still not been launched.
Apple loyalists in India believed all of this would change with the global launch of the iPhone SE in March this year– a cheaper iPhone with a smaller screen ostensibly targeted at emerging markets – it was natural for them to think that India would be right on top of Apple's priority list this time around. But, on March 21, India's Apple fanboys were left heartbroken yet again. At the Apple Keynote event, the phone was launched at $399 and as always, India didn't feature in the list of countries where the phone would be made available first. What made this a double whammy was the fact that the phone was nearly $150 more expensive in India than in the U.S.!
A month later, Apple was making headlines for all the wrong reasons. The company had posted its first ever decline in iPhone sales and the company's sales numbers had dropped majorly in one of its key markets, China. But, this time India served as a beacon of hope for the technology behemoth. iPhone sales in India had grown 56 per cent in India in January-March quarter. India's neglected Apple fanboys were making themselves heard.
It would only make sense then for Apple to shift focus to one of the world's fastest growing smartphone markets and that's exactly what it did. Apple decided to play its wild card and shipped its love to India via the captain of the ship itself - Tim Cook. This visit was the first for an Apple CEO and everyone wanted some face time (pun intended) with Cook. During the course of his visit in May, Apple launched a development office in Hyderabad focused on map development. The company also launched an app design and development accelerator in India's startup hub, Bengaluru. But, that was merely a friendly overture from the tech giant to India. Apple's proposal(s) were soon to follow. During his visit, Cook met with Prime Minister Modi, politicians, businessmen, bankers, Bollywood stars and yes, he also attended an IPL match!
According to technology market research firm Counterpoint, the iPhone's market share in India is pretty minimal. In the first quarter of this year, it was 1.1% of the overall handset market (including feature phones) and 2.5% of the smartphone market.
However, Cook understands this and has fathomed that the potential for growth in India is immense, especially considering the imminent pan India launch of 4G services. During an earnings call in April, he said, “It is already the third largest smartphone market in the world. But because the smartphones that are working there are low end, primarily because of the network and the economics, the market potential has not been as great.”
Just to point out how rapidly things are changing, according to Counterpoint, India's smartphone market grew 23 per cent in the first quarter of 2016, surpassing the U.S. to become the second largest country in terms of users.
Cook also said that he thinks India is today where China was seven to ten years ago. That's a fair point. But, the Indian consumer is still extremely price conscious. If Apple were to choose to launch a truly ‘budget' iPhone tailor made for India, the concern is it could compromise its premium brand image and possibly reduce its profits to Android or nada levels! Surely, that would be a shot in its foot and that's what seems to have prompted the company to submit a proposal to the Indian government to sell refurbished iPhones at heavily discounted prices. Apple has tried this model with its products in other markets and it basically entails returning used iPhones to Apple, which are then tested, certified and then sold to customers with a new warranty. This sounded like quite the plan, to get things started in India at least. Apple could maintain its ‘premium' image and the Indian consumers would get access to cheap iPhones.
However, recently at a press conference, the Commerce & Industry Minister Nirmala Sitharaman quashed the plan.
We would not be in favour of whatever you may call them - used but refashioned, remodelled, updated... used goods. We are not in favour of bringing them here.Nirmala Sitharaman, Commerce Minister (Source: PTI)
However, recently at a press conference, the Commerce & Industry Minister Nirmala Sitharaman quashed the plan saying, “We would not be in favour of whatever you may call them - used but refashioned, remodelled, updated... used goods. We are not in favour of bringing them here.”
(Quote from PTI)
That's just strike one for Apple in India. The bigger setback for the tech giant was when it sought to set up its own stores in India without complying with the local sourcing requirements. For such a waiver, a company must show that its products represent ‘state of the art' or ‘cutting edge technology'. However, both terms are still to be defined by the government.
Earlier, when Apple had made the application for a waiver, the Foreign Investment Promotion Board (FIPB) had said that Apple doesn't qualify for such an exemption and must procure 30 percent of components locally if it wants to sell through its own retail stores in India.
The Commerce & Industry Minister also mentioned that her ministry had recommended Apple's case to the Finance Ministry, but the Finance Ministry did not approve it.
Devraj Singh, Executive Director, tax and regulatory services at EY India explains, “The Foreign Investment Promotion Board (FIPB) may be of the view that the DIPP should bring clear guidelines as to what should constitute ‘state of art' and ‘cutting edge technology', so that a consistent view can be adopted for the future proposals seeking such exemption under this category.”
Talks between the two ministries are still ongoing. That said, granting Apple the exemption it seeks seems like a tricky proposition for the Indian government and understandably so. If the government were to grant Apple the waiver, then it could set a precedent for other companies eyeing a similar route to launch their own single brand retail stores in the country. Just last month, Xiaomi withdrew its request for exemption from the 30 percent sourcing rule, a move that's being viewed as a boost for the government's “Make in India” campaign. It has also been reported that Chinese mobile company LeEco is still seeking such an exemption from the Indian government.
Counterpoint's research director, Peter Richardson says, “Apple stores do offer a flagship experience. It would certainly help cement the brand in the India market. However sales through physical flagship retail, assuming they can be established, would likely be only a small percentage of Apple's overall sales. Authorized resellers and, potentially, Apple online stores would likely also be a part of the retail mix.''
The flagship experience that one enjoys at Apple owned stores, say in New York or San Francisco is another thing that Indian customers have been missing out on. In India, Apple sells its products through authorised resellers like Redington India. So, if the Indian consumer is paying nearly $700 for a phone, it's justified for him to expect a refined, world class shopping experience. Instead, all he gets is an ordinary shopping experience no different from the other brands selling their products on Indian store shelves.
Tim Cook's visit has thrown up more questions than answers. Will the government eventually warm up to the idea of Apple selling refurbished iPhones? Will Apple be permitted to open its own branded stores in India without actually ‘Mak-ing in India'? It's certain that Apple is finally wooing India in earnest, but the biggest question is – will India continue playing hard to get?
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