Why Apple’s India Strategy is A Winner

iphone4

Don’t look now, but here comes India.

While everyone obsessed yesterday over Apple finally launching on the world’s largest carrier, China Mobile — and the Chinese market in general — smart companies are starting to focus on the smartphone market of the future: India.

The country’s 1.2 plus billion people are kinda hard to ignore. Also: India is so much more than the “other China” when you dig into the details of that smartphone market. Everything about India is an opportunity for smartphone companies and providers of mobile anything. And the major companies are each taking radically different approaches.

I think Apple’s strategy is the best one, and I’ll tell you why. 

Compared with China, India is a much bigger opportunity in so many ways. A lot more people there will be getting their first mobile phone this year, and that’s an opportunity. India has a massive English-speaking population, and that’s an opportunity. India doesn’t have a significant industry of domestic counterfeit, copycat handset manufacturing, and that’s an opportunity. India is a democracy, rather than an authoritarian, overbearing, one-party government ruled by the Communist Party, and that’s an opportunity.

But the biggest opportunity is this: India will gain more than 200 million new smartphone users in 2014 (people getting their first phone plus people movin’ on up like the Jeffersons from a feature phone to a smartphone).

By the end of 2014, India’s smartphone-using population will be bigger than America’s.

The challenge with India is that India phone buyers are very cost-conscious. You can’t just go into the Indian market selling selling the world’s highest-end phones and expect big sales.

India is both an opportunity and a challenge, but smart companies are rushing in.

Summarizing the respective strategies of HP, Samsung and Apple in the rising Indian smartphone market, can be done in one word each: big, cheap and old.

After HP’s bizarre gymnastics in the smartphone world — acquiring Palm only to kill it, followed by two years in the smartphone wilderness without a product on the market, HP is back. And it’s first phones are exclusive to India for now.

That company’s market research told them that phablets — giant phones — are the fastest-growing category in India, so they’re going big with a six-inch device and a 7-inch one.

Samsung is another pushing into India. That company’s strategy is to sell India-first or India-only phones that are relatively underpowered and somewhat inexpensive. Samsung started selling this week its Galaxy Grand 2 smartphone, a dual-sim phone that costs $374 unlocked. A cheaper single-sim model is coming soon.

Apple’s strategy is unique. Rather than making a phone especially for India, Apple is focusing on the iPhone 4, a phone that first shipped 3 and a half years ago.

Of course, Apple will sell plenty of iPhone 5S phones for wealthier Indians. But for the millions upon millions of first-time smartphone users, the iPhone 4 is a great strategy, and it’s the one that’s probably best for budget-minded Indian consumers.

Apple is able to sell the iPhone 4 inexpensively because it can benefit from economies of scale, the fact that factory infrastructure has already been developed and because it’s using components that have come way down in price since the phone first went on sale.

When I got pick-pocketed in Spain less than a year ago, and my new iPhone 5 was stolen, I went back to my iPhone 4. I used it for many months. It’s such a great phone. The camera is excellent.

More to the point, the iPhone 4 is not a phone that was ever designed or manufactured deliberately to be underpowered. It was designed and made as the very best phone Apple was able to build at the time.

And Apple’s strategy is better for the environment, ironically, and it’s one that Apple does and should use globally for establishing a range of phone pricing options.

For starters, the strategy incentivizes Apple to future-proof each new phone model, knowing that the phone will continue to be manufactured for up to 5 years. Just look at the iPhone 5S with its 64-bit processor. In a year or two, the market will be slowing saturating with 64-bit phones, and Apple’s low-cost option will already be a 64-bit phone that can run future 64-bit apps

Whether you agree with it or not, phones are status symbols. People tend to be either proud or embarrassed about their phone. But selling an older model of phone in a cost-sensitive market like India incentivizes second-hand purchases, which is the best way to help the environment. Nobody will know if you bought that iPhone 4 brand new, or used. And you’ll probably be able to get it cheaper used.

And, as I suggested earlier, using older models as a current low-cost option, is radically efficient. Samsung’s and HP’s India phones require factory re-tooling and poor economies of scale for some components. Apple’s doesn’t.

So Apple’s strategic selling of the iPhone 4 as the main phone for the fast-growing Indian smartphone market is a good one.

And as the Indian economy continues to grow, more Indians get richer and as the price of smartphones continues to drop, Apple will no doubt be there in force to offer the full range, from the old-best thing to the new-best thing.

(Picture courtesy of NPR)

  • sainathvaidya

    Indian youth is net savvy so they know what’s best in the market right now. I personally feel that not many people will be eager to opt for iPhone 4…..especially it’s so sluggish on iOS7. There are much better options at this price range…unless apple wants to sell iPhone 4 at Rs 12K-15K price!

  • misj

    Apple is between a rock and a hard place. But that’s the path it’s chosen. It’s a high-end brand. And India is a poor country (where Android smartphones, full-featured, are as low as $50 without a plan).

    Some people will buy the iPhone 4. But smart people should avoid it. It’s 3.5 year old technology, and comes with only 8GB? C’mon.

  • 96aman96

    if apple wants to harvest some green then it should start selling contract phones
    for example the iphone 4 costs 12-15k for the 8gig model while a contract iphone5s in the us costs 199$
    (about 12.2k)
    so indians have to pay 55k for the flagship device and all they get for 199$(12k) is a sluggish on ios7 and has a 5mp 3.5 yr old shooter …
    Thats apple

  • Steven Quan

    India’s GDP: $1.8trillion. China’s GDP: $8.2trillion (that’s more than quadruple Mike). Average annual per capita income for India (2012): $1,499. Average annual per capita income for China (2012): $6,071. China’s numbers actually look pretty favorable compared to India for an authoritarian, overbearing, one-party government ruled by a Communist Party.

    For India, a quarter of the population lives below the government established poverty line of less than forty cents per day.

    The fact that Apple is opening up in India with a 3+ year old outdated smart phone which is already obsolete tells you everything you need to know about how much money the population has.

    And Mike, you are dead wrong about not having copy cats in India. The Indian market is flooded with cheap Android phones and tablets made by the Chinese.

    Given these facts you just sound like another incredibly ignorant person who thinks India is some sort of holy grail. Sure, they have a huge population, but they are largely poor, and a lot of critical infrastructure is not there.

    Only 57million Indians owned a PC in 2012. Not such a great stat when you consider India had a population of over 1 billion at the time (less than 6 percent of the population).

  • monstermasten

    Why not go for selling the iPhone 4S in India? Then you get iOS7 running smooth. Apple should NOT ship iPhone 4 with iOS7, it will be an embarrassment imo.

  • vforvarun

    The problem in India is people earn in Rupees but are expected to spend in Dollars. All electronic devices are sold at Dollar equivalent rates, no wonder it is expensive. The cost of iPhone in India is equal to a couple of months’ salary of a person working in a software company…!! The reason iPhone is doing great in developed countries is because, it is sold as part of a 2 year contract where the price of the phone is included in monthly phone bill. In India there is no concept of the contract. One has to buy the smart phone paid in full and then subscribe to a mobile connection. Under these circumstances, no wonder why people in India are so cost conscious when buying a mobile phone. So, in India, iPhone is still a luxury. I don’t think iPhone can ever make a huge impact in the Indian market given the price is so high…!!

  • Samir Shah

    First, Apple should not go for having a distribution network in India. Redigton and Ingram are OK but no more distributors. Instead Apple should go for online sales where Apple can experiment and change strategy very fast based on market feedback. Apple can use Apple’s own online store or other strong online stores like Flipkart. Also the market Apple wants to address by going online matches with online going, upward mobile people. Also iPhone 4 at Rs. 22,500 as in the reports is neither here not there, the price should be either Rs. 24,999 or Rs. 19,999. iPhone 4 with 8GB should not be a problem unless somebody makes a real issue out of it and that goes viral. HAVING AN ONLINE PRESENCE IS MORE IMPORTANT THAN HAVING A PHYSICAL STORE BECAUSE APPLE’S MARKET IS DIFFERENT.

  • Prajeth Nagaraja

    My family comes from India and I happen to visit India every year, so rarely see people using iPhones there. I’ve only ever seen like 3 iPhone’s being used in India and everyone else uses big fat Samsung phones (or should I say, Samsuck phones…I know terrible pun). In my opinion, this strategy is good, but it makes me feel like that everyone is going to be behind. All my cousins in India and their friends ridicule me every day I use my iPod touch there and say I’m “too behind” for living in America. If we give them iPhone 4’s they will miss out on the latest enhancements that Apple has done. But that’s more of a personal gripe for me :P

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Mike ElganMike Elgan writes about technology and culture for a wide variety of publications. Follow Mike on Google+, Facebook and Twitter.

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