Apple’s first physical retail store is located in the populous city of Mumbai.
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For years, Tim Cook has been optimistic about India. Now, he is betting big on South Asian giants like Apple shifting focus away from China and expanding its footprint in India.
However, analysts told CNBC that the iPhone maker’s dependence on China will remain for years to come.
Martin Yang, senior analyst for emerging technologies at Oppenheimer & Co, said India has the potential to be the “next China” for Apple production, but it could take up to a decade before that. that happens.
Apple set to open second Indian retail store in Delhi on Thursday, two days later First opening in Mumbai.
The Cupertino-based tech giant still has a strong presence in China thanks to its supply chain partners and China’s infrastructure capabilities are still much better than what India can offer, Nitin Soni, senior director at Fitch Ratings told CNBC.
“Apple will take years to diversify away from China,” said Soni. “The country is still a very big bag for Apple – not just in the assembly line, but in the semiconductor and testing ecosystem.”
Apple’s efforts to moving product assembly out of China has become more urgent over the past five years as rising US-China trade tensions and supply chain disruptions caused by Beijing’s no-Covid policy have unraveled. The iPhone maker had to scale back production in China due to those restrictions, a move that hurt its bottom line.
The population growth and pure opportunity around India is the golden goose for Apple.
Dan Ives
Wedbush . Securities
Navkendar Singh, vice president of International Data Corporation (IDC) India, said it is highly unlikely that Apple will be able to completely eliminate its dependence on China.
“Given the sheer scale of costs, logistics, and inertia of some of the suppliers in the Chinese ecosystem, it’s highly unlikely that Apple can completely withdraw itself from China,” Singh said.
However, Apple’s growth in India is just getting started and plenty of opportunities await in both manufacturing and retail sales in the country.
Apple’s ambitions for India
According to data from IDC, India is the second largest smartphone market worldwide in terms of annual sales, accounting for almost 12% of the global market.
According to the market intelligence firm, Apple shipped 6.7 million iPhone units in 2022 from India, a spike from 4.8 million devices in 2022. India comes in at sixth place behind the US , China, Japan, UK and Germany in terms of global iPhone shipments in 2022.
Dan Ives, analyst at Wedbush Securities, said: “Pure population growth and opportunity across India is a golden goose for Apple. It’s a tough market for Apple to roam on the iPhone front. over the years but is now clearly starting to find its way.” , speak.
Today’s tech giants manufactures 5% to 7% of its iPhones in Indiaa huge leap from just 1% in 2021 — and it doesn’t stop there with further plans underway to strengthen the company’s position in the country.
“China and the US along with Europe are still the heart and lungs of the Apple story with India going to become Apple’s top 5 focus markets. The hopes are high that India can be the growth engine. major increase for Cupertino in the coming years,” Ives said. CNBC via email.
Although the Indian government said in January that Apple is aiming to manufacture 25% of its iPhones in India, Ives said it is a “lofty” goal and that the achievement is 10% to 15%. output seems more realistic in the long run.
Singh said that India will also continue to play a second role after Vietnam in the production of more complex products such as MacBooks, but smaller products such as Apple smartwatches and AirPods will soon be produced. made in India.
There is such market concentration in urban centers, and Delhi and Mumbai “make up almost a quarter of the market for Apple.” [in India],” said Singh of IDC, adding that more physical stores could open by mid-2024.
India’s Rising Middle Class
IDC data shows that Apple has only 5% market share in India as low-cost to mid-range devices continue to be the top choice of consumers.
However, the country’s growing adoption of technology and stronger consumer spending will drive higher iPhone sales, Fitch’s Soni said.
“We see that the middle class is getting richer and moving towards the upper middle class, and the trend of customers buying flagship smartphones is increasing,” Soni said. “This is also supported by the fact that 4G is now easily accessible across India.”
However, cheaper labor costs in India will not bring down Apple’s iPhone prices as customers will be willing to pay premium prices for Apple products, Singh said.
“Apple is not going to reach mass market prices,” he said. “It’s still a premium brand and they want to keep that brand aura.”
Singh added that the company could instead offer programs or tie up with banks to make products more affordable.
— Arjun Kharpal of CNBC contributed to this report.
