Apple CEO Tim Cook laid out his company’s plans for the vast Indian market in a meeting Saturday with Prime Minister Narendra Modi, who in turn sought Apple’s support for his “Digital India” initiative focusing on e-education, health and increasing farmers’ incomes.
It’s fine that India ask for help from Apple, but the country is going to have to give something too—you can’t ban Apple from selling used iPhones and then ask them for help.
I see that a lot of Western technology sites have not completely grasped the situation with Apple in India and India’s particular idiosyncrasy with technology. Remember, India is generally a much less hostile environment than China is for Western firms. However, there is a fair bit of ill feeling given the heavy handed role played by the US administration in shielding Dow Chemicals from facing full justice in the Bhopal Gas Tragedy and caution has become the name of the game in dealing with MNC’s.
The current Indian government is dealing with Apple very carefully to ensure that both sides get a good long term deal that is viable economically, socially, politically and environmentally.
Given India’s history with global brands, there is fear that Apple’s primary strategy is to sell used iPhones in India with minimal commitment to invest in the country in terms of generating jobs and boosting the local economy. The ban on the former is to ensure that latter takes place first and once it has happened to a substantial degree, Apple will be allowed to sell refurbished phones.
After all, India does not want to get snowed like Apple snowed HP on the iPod. It would be much more catastrophic event.
Coming to the main point: The three big stumbling blocks to Apple’s current pricing strategy in India are the import duty, the Apple franchisees and poor understanding of the carrier policies. The following assumes 1 USD = 65 INR for easy calculations, though currently it generally hovers between 66 and 67.
Posts taxes, a 16 gb iPhone SE retails for ~$450 (INR 29,250) in the US.
Add approximately 15% import duty that takes the price to ~$520 (INR 34,000).
Add in distribution costs, partnership costs, etc and Apple franchises in India sell the phone for INR 39,999 ($615), close to 40% increase on the price of the phone. This number is roughly 0.5-2.5 month salary for your average Indian professional depending on what field they work in.
In fact, many argue that the cut that the franchises are taking on the 16 gb SE –– ~ INR 6000 ($90) –– is too high and has been made so in order to allow them to sell their inventory of iPhone 5s/6. There may be some substance to this as repeating the calculation for 64 gb iPhone SE shows franchises charging a cut of ~INR 9000 ($140) on it. No reason why a franchise should be allowed to charge more commission for more storage eh?
One more thing to consider is the poor carrier policies and it’s effect on consumer behaviour. Limited number portability was introduced to India roughly 5 years back and it’s inched up to full number portability recently. India still has roaming charges based on 22 ‘circles’ and the cost of using a cell phone shoots up drastically once you move out of your circle.
So most people in India (and people in many South Asian countries) generally have 2 sim cards (separate city/village numbers to avoid roaming costs or separate personal/business numbers for accounting purposes) and many even have 3 or more sim cards depending on their personal/professional situation.
As such, a lot of people end up buying multiple single sim smart phones or feature phones that cost around INR 6,000 -14,000 ($90- $215) each while most people prefer dual sim phones. A phone that is selling for INR 18,000+ ($275+) in this country is generally a dual sim phone.
A dual sim iPhone SE would have sold like hot cakes in this country even at its present price point given the brand value and status symbol Apple represents. However that would involve making a thicker iPhone so thats not happening no?
For Apple to succeed in India it needs to invest in India first and it needs to tailor its products to fit the market. If China got Apple to make a gold iPhone, India asks it to make a dual sim iPhone. Ideally, a 32 gb dual phone that retails for around INR ~30,000 ($460) and has a 3 year upgrade cycle. But really, any reasonably specced and priced dual sim phone will do.
It also needs to limit predatory pricing by franchises, thus boosting sales.
Even better, chuck them completely, open retail stores and e-waste recycling centres, thus generating jobs and in exchange get a deal that cuts down the import duty. Consider making Apple products/merchandise in India and exporting it to other countries, further sweetening the deal for the Indian Government and dropping import duty to nearly zero.
Not to mention improve Maps and Siri for use in India. Both these core services are of limited used currently and have a long way to go before they can compete with Google’s offerings in India.
While I personally own and enjoy Apple products, the deal Apple was looking for from India earlier was not well considered. The bottom line is that Apple needs India more than India needs Apple and a deal needs to be drawn accordingly to benefit of both parties. It looks like Apple has realized this and a more substantial deal is on the cards. Let’s wait and watch how it pans out.
PS: Let me know if you want to clean this up for a piece for your site.
Insane. If these are the arguments Apple is having to listen to (and humor), God help Tim Cook. I hope he has a Xanax handy. “We’re pissed about Bhopal. It has nothing to do with anything, but let’s put that on the table. China got a new color (no they didn’t, of course; everybody did, but anyway), so we need an entirely new model with custom innards.” And the rest of it. Wow. Just wow.
No one is talking to Cook about Bhopal but these are things that play a role in the background.
Basically Apple asked the Indian government to bend the rules for its benefit and went too far. The local players in India pushed back with good arguments on economic and environmental outcomes. So the rules are being bent but to a lesser extent than Apple would like. I doubt this was a surprise to anyone, this is how negotiations on this level always go.
The government has to balance a number of factors in its decision while knowing that the opposition will gleefully drag it over the coals publicly if it gets things wrong. Heck, it’s going to do so nonetheless even if everything pans out well. That’s just how politics is played.
Getting this decision wrong badly would affect multiple sectors of the Indian economy from homegrown startups to FDI by other electronics MNC’s. Why would Samsung or Xiaomi bother to manufacture here if they can lobby to get similar exemptions?
As far as the dual sim phone goes the data speaks for itself. The Indian market is a unique entity, demanding innovative thinking in sales and services from firms wanting to do business here.
Couple of examples for you to pursue:
http://www.businessinsider.in/How-Are-Sachets-Changing-The-Game-In-Skin-And-Haircare/articleshow/44948526.cms
https://gigaom.com/2011/12/13/indias-missed-call-mobile-ecosystem-2/
India has a history of being taken to the cleaners by western firms – Bhopal is just one tragic example, but there are many others. Over generations is has built up resentment.
Over the last generation India has finally been taking control of it’s own fate and building a self sustaining tech industry. Apple is the world’s biggest company, so India has a right to be cautious. Hardik is right – Apple needs to invest in India over the long run to be successful there.
I am optimistic that Apple can grow in India and Tim Cook is the right CEO for Apple right now since he actually understands: India doesn’t have to adapt to Apple, but Apple will have to adapt to India.
As I said before its more about caution than resentment, especially in the higher echelons where realities of trade are well understood.
And it does look like a substantial and meaningful deal is taking shape to the advantage of everyone.