(Chinese Version)

As a part of its newly-invigorated attempt to improve sales in India, Apple releases its first piece of TV commercial in India and is reportedly looking for 500 "Authorized Mobility Resellers" in 12 major cities across India to better reach to its consumers. Up till now, over 100 resellers have already signed contracts with Apple. Can Apple really conquer India smart phone market?

Earlier, I wrote an article on a local smart phone maker Micromax and summarized the advantages Micromax have in the competition with foreign brands into two points:

For one thing, since India is still under-developing in terms of its infrastructure and intellectual property protection, smart phones are still not widespread while phone models developed by Micromax are a lot cheaper and enough to meet basic needs.

For another, Micromax is better at adapting to government policies, catering to India consumers’ needs, and providing services and phone models that support a variety of local languages.

Indian smart phone makers know better the need of Indian consumers

Trade protection pervades in India. Indian government is reportedly going to increase import tax of electronic products such as smart phones so as to both boost Indian smart phone makers’ own installing, developing and manufacturing ability and lower the unemployment rate. Indeed, Micromax seems to be in the upper hand from this perspective.

The other days, some so-called “insider” copied my logic and suggested that since Apple, similar to Chinese smart phone makers who look for a share of the market in India, could never compete with Micromax in the above two aspects either, Apple would ultimately fail in India. However, he failed to notice the fundamental difference between Apple and Chinese smart phone makers.

Apple’s goal isn’t to sell more phones than Chinese smart phone makers, but to maximize its revenue. Outside the US, Apple is never the top one in terms of market share, but always the number one money-grabber. In Apple’s heyday during 2014, Android seized a market share of 84.4%, while Apple only grabbed a market share of less than 20% but 92% of the total revenue of the global smart phone market. Similarly, Apple aims to repeat its success in global markets and grab the most revenue instead of market share in India.

Apple's completely different business strategy

Another difference between Apple and Chinese smart phone makers lies in their different business model in India. Most Chinese smart phone makers lack key technologies in terms of hardware and OS developing and aim to penetrate the huge Indian market simply by repeating their price strategy back in China. Indian local brands such as Micromax, also lack key technologies and sell phones manufactured by a Chinese contract factory based in Shenzhen, but they are still in the upper hand since they are well-protected by Indian government, warmly welcome on the market, and know better what Indian consumers need compared to Chinese smart phone makers.

Apple, however, adopts a complete different business model. Throughout these years, Apple has gradually built a whole ecosystem of its products, including OS, hardware, App Store. In this case, India is only a necessary step of Apple’s global expansion plan. With key technologies in both hardware and software developing, Apple is always in the upper hand in any market. By the way, FOXCONN, Apple’s contract factory, has already set up a factory in India to manufacturer iPhones.

To wrap up, while Chinese smart phone makers target the huge market in India, Apple enters Indian market as its attempt to include India into its global ecosystem.

Samsung is going to be challenged by Apple

However, Apple is also facing a standstill in its sales performance. The sales figure of Apple Watch seems not to be that satisfactory, while the sales volume of iPad is also reducing. To stand out, it is probable that Apple will attach great importance in Indian market where the need for smart phones is only beginning to increase.

Although the income level is still low, low price is still a great market-winner and smart phones are only beginning to spread in India, 80% of India’s wealth belongs to only 20% of the population, that is, middle and high-income group. For sure, Apple isn’t able to repeat its success back in Chinese market here in India, but will target mainly middle and high-income group and finally outperform Samsung, the top smart phone manufacturer in India’s high-end smart phone market at present.

Moreover, Apple is grabbing Android users and attracting them to shift to iPhones by giving away their Android phones to Apple Stores and receive vouchers in return, so that Android users get to buy iPhones at a lower price. At present, Apple is selling its previous versions of iPhone, such as iPhone 4S, iPhone 5S, iPhone 5C, etc. at a lower price, and it turns out Indian consumers love these iPhone models and Apple’s sale volume soars. In the near future, Apple will continue to adopt this price strategy and release its iPhone 6C model, which for sure will be a great rival for Android-based phone models.

Apple has already become an expert in localization

Besides that, Apple is actively localizing its products in global markets. Different from Steve Jobs, Tim Cook attaches higher importance to localization, as can be seen in the Chinese elements in Apple’s new official stores in Hangzhou and Chongqing. These elements narrows the gap between Apple and Chinese consumers.

Last year, Apple rolled out bigger-screen iPhone 6 to better cater to the Asian market, which turned out to be warmly welcome among Asian consumers. Also, Apple carried out a 1 RMB discount activity in its official stores in China, and opened official stores also on Tmall. Moreover, Apple teamed up with China Mobile and provide contract iPhones to China Mobile’s users. Apple’s CEO Tim Cook also opened his own official Sina Weibo account. All these efforts showcased Apple’s willingness and capability to localize its brand in global markets. It is even fair to say that Apple has already become an expert in localization.

Apple is also doing all it could to adapt to Indian market. Since Apple still didn’t have official stores in India, Apple has to rely on local distributors to sell its products. It is reported that Apple is right now looking for 500 "Authorized Mobility Resellers" in 12 major cities across India to better reach to its consumers. Up till now, over 100 resellers have already signed contracts with Apple. At present, Redington and Ingram are the major distributor of Apple. Meanwhile, Apple is looking for experienced policy advisers to help Apple better cooperate with Indian government. According to LinkedIn, applicants should have rich experience in cooperating with Indian government, help Apple deal with government policies, negotiate with Indian government and help bring about policies favorable for Apple, and maintain a good relationship with Apple’s major shareholders.

To better reach Indian consumers, Apple is not only carrying out installment purchase services so that consumers can buy iPhones by installment, but also opening up small-scale community shops in first and second-tier cities across India. Moreover, Apple’s contract factory FOXCONN is reportedly to be negotiating with Indian government on opening factories in India. FOXCONN plans to set up a factory in India so that Apple gets to supply its products, including iPhone, iPad and iPod, to Indian consumers in time, and even to global markets. Since India is still underdeveloped in infrastructure sector, Narendra Modi, premier of India, stated for several times that India should become a manufacturing giant. In this case, Indian government should be in favor of FOXCONN’s plan.

Indian smart phone market might follow the path of Chinese one

However, it seems that iPhones are still too expensive for Indian consumers. Some critics suggested that: “For sure, most Indian consumers want to buy iPhones, but they can’t afford one. That’s why the iPhone price and average GDP ratio in India is higher than anywhere else in the world.” Yet, in a larger picture, India’s economy is developing pretty fast, so in the near future, Indian consumers might be able to afford iPhones soon.

Other economists added that: “At present, the average annual income of Chinese is 12% of Americans, while the average annual income of Indians is already 7.5% of Americans.” In fact, the average income of Indians has already reached 1,610 dollars. If this figure is increasing at 8.9% annually, Indian might follow China’s path.

Thus, today’s India looks like China back in 2010. At that time, feature phones are gradually replaced by smart phones and Android-based smart phones, such as phone models of HTC and Samsung, are the top choice for many Chinese. Later on, with the increase of income level and development of smart phone industry, Chinese consumers began to turn to iPhones, while HTC was gradually driven out of market by Apple and other Chinese smart phone makers. Likewise, Micromax, the combination of Xiaomi and HTC, is the top choice of Indian consumers today.

However, with the increase of income level and development of smart phone industry, Android-based phone models will gradually expose its weakness in terms of supply chain, innovation, user experience, and finally be replaced by iPhones, which is supported by an ecosystem of Apple’s products. Indeed, Apple is gradually becoming more and more popular among Indian consumers. It is reported that the sales volume in the second quarter of 2015 increased by 93% in India, while the same figure increased only by 87% in China. Although Apple only grab 2% of Indian smart phone market at present, its sale volume will certainly soar in the near future.

From the perspective of investment, India is also pretty promising in the future. Raghuram Rajan, governor of the Reserve Bank of India, added that investors are becoming more interested in Indian market. Recently, Huawei finally received an official certificate to manufacture smart phones in India, on the condition that the senior officials of Huawei’s factory in India should be Indians. Although strict towards foreign investors and companies, India is in dire need of foreign technologies to help India become a manufacturing giant, and boost the installing, developing and manufacturing abilities of Indian smart phone makers. Indian government should strike a good balance between regulations towards and introduction of foreign capitals and technologies.

In this case, India might attach great importance to smart phone manufacturing. While Indian government wants to introduce key technologies to Indian smart phone market, Apple is the leading innovator in smart phone manufacturing industry and is looking for experienced policy advisers to better cooperate with Indian government, so that its contract factory can work more smoothly in India.

I admit that India is still a developing country and India’s middle-income group is growing slowly. However, with the continuing development of India’s economy, Apple might gradually win more consumers in the near future.

To address the challenge from Apple, Chinese smart phone makers should learn from Apple and pay attention to knowing better Indian market and localizing their brands among Indian consumers. If not, they might find out that at last that while low-end market will be dominated by Indian smart phone makers, middle-end market will be controlled by Samsung, and Apple will dominate the high-end smart phone market in India.

[The article is published and edited with authorization from the author @Wang Xinxi, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.