Apple makes slow pivot to India as China sales cool

Once Apple's largest growth market, revenues from Greater China slid 30 percent during the fourth fiscal quarter of 2016, prompting the company to turn at least part of its focus toward prospects in India.

In announcing earnings on Tuesday, Apple revealed Greater China revenues of $8.8 billion, down 30 percent from $12.5 billion in the year ago quarter. And while the company saw negative year-over-year compares in the Americas and the Asia Pacific region, China was the only market to post a sequential decline from fiscal quarter three.

The negative results follow a similarly steep 33 percent dip in China revenue seen in the June quarter.

During an investor conference call, Apple CEO Tim Cook attributes the downward trend to a massive uptick in demand driven by the launch of iPhone 6 and 6 Plus in 2015. The large-screened iPhones spurred a surge of upgrades worldwide, but no region was more impacted than China.

Upgrade rates returned to normal in 2016, causing a different problem for Apple. The company boosted channel inventory in the first quarter of that year after incorrectly forecasting demand, forcing an inventory reset in subsequent quarters.

Still, Apple is confident the Chinese market will equalize, especially after an initially positive response to iPhone 7 and 7 Plus.

"We are very bullish on China," Cook said. "We continue to see a middle class that is booming there. There might be some sort of a new normal in the economy, but a new normal there is still a good growth rate."

That being said, Apple is making a slow pivot to India. At the top of today's conference call, Cook announced a partnership with Indian telco Reliance Jio, which is working to build out an all-IP 4G network in India that will bring coverage to 18,000 cities and 200,000 villages across the country. Further, Jio is offering a free year of service to iPhone buyers.

Fast, robust cellular networks are vital to iPhone's success. Like other smartphones, many iPhone features require internet connectivity, something not yet widely available in India. Cook, however, noted government investments into a working technical infrastructure are enabling consumer access to technology like iPhone.

"Our iPhone sales in India were up over 50 percent in fiscal 2016 compared to the prior year, and we believe we're just beginning to scratch the surface of this large and growing market opportunity," Cook said.

Responding to an analyst question, Cook noted almost half of all Indians are under the age of 25, and the already populous country is expected to swell beyond China in the next decade. India's GDP is on the way up, as well, though might not be a factor in iPhone's success.

"That's not critical for us to have a great success there," he said. "The truth is there's going to be a lot of people there and a lot of people in the middle class that will really want a smartphone, and I think we can compete well for some percentage of those. And Given our starting point, even though we've been growing a lot, there's a lot of headroom there in our mind. So, we're working very hard to realize that opportunity."

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17 Comments

securtis 8 Years · 86 comments

About 8 years ago

Good luck with that.....way too many phone choices there and few with enough $$

SpamSandwich 19 Years · 32917 comments

India is even more backward than China. I doubt there's much of a high-end product market there.

anantksundaram 18 Years · 20391 comments

securtis said:

Good luck with that.....way too many phone choices there and few with enough $$

This is the only ultra-large market left for substantial future mobile phone growth based on the product portfolio Apple currenly has. Period. They have to figure out a way to make it work. It's not like they don't know how, despite naysayers and pooh-pooh-ers like you.

India has about 200M smartphone users already, on top of half a billion internet connections and over a billion cellphone connections. 4G is rolling out in a huge way. Reliance Telecom has introduced incredibly aggressive, almost giveaway pricing on mobile plans, betting on ecosystem growth. With the unique digital ID system now covering 90% of Indians, i.e., over one billion people (it's called "Aadhaar" -- check it out -- and it's something that countries like the US and China can only dream of, currently) there's a massive app economy poised for huge takeoff.

Amazon is making bets, as are Google, Samsung, and Microsoft. I am glad that Tim Cook isn't as foolish as people like you think he might be on this front. You really might consider educating yourself a bit more on what's going on out there.

anantksundaram said:

securtis said:

Good luck with that.....way too many phone choices there and few with enough $$

This is the only ultra-large market left for substantial future mobile phone growth based on the product portfolio Apple currenly has. Period. They have to figure out a way to make it work. It's not like they don't know how, despite naysayers and pooh-pooh-ers like you.

India has about 200M smartphone users already, on top of half a billion internet connections and over a billion cellphone connections. 4G is rolling out in a huge way. Reliance Telecom has introduced incredibly aggressive, almost giveaway pricing on mobile plans, betting on ecosystem growth. With the unique digital ID system now covering 90% of Indians, i.e., over one billion people (it's called "Aadhaar" -- check it out -- and it's something that countries like the US and China can only dream of, currently) there's a massive app economy poised for huge takeoff.

Amazon is making bets, as are Google, Samsung, and Microsoft. I am glad that Tim Cook isn't as foolish as people like you think he might be on this front. You really might consider educating yourself a bit more on what's going on out there.

I have.....WSJ/CNBC has articles about "aadhaar" and also an article last week highlighting indian women being banned from smartphones by their male family members. Popular smartphones in india sell for between $70-$100 by chinese/korean makers in cutthroat competition leaving little room for profits. It's also funny that you mention aadhaar in that the indian govt. specifically invited apple to a meeting concerning its rollout this July and apple was a no show.....

http://www.bloomberg.com/news/articles/2016-09-13/india-wants-apple-and-google-phones-to-use-government-encryption

I believe apple will need to bend to their privacy demands if they want to make money in India and China. India will probably force aadhaar on phone makers in the near future and I could see China doing something similar.

securtis said:

anantksundaram said:

securtis said:

Good luck with that.....way too many phone choices there and few with enough $$

This is the only ultra-large market left for substantial future mobile phone growth based on the product portfolio Apple currenly has. Period. They have to figure out a way to make it work. It's not like they don't know how, despite naysayers and pooh-pooh-ers like you.

India has about 200M smartphone users already, on top of half a billion internet connections and over a billion cellphone connections. 4G is rolling out in a huge way. Reliance Telecom has introduced incredibly aggressive, almost giveaway pricing on mobile plans, betting on ecosystem growth. With the unique digital ID system now covering 90% of Indians, i.e., over one billion people (it's called "Aadhaar" -- check it out -- and it's something that countries like the US and China can only dream of, currently) there's a massive app economy poised for huge takeoff.

Amazon is making bets, as are Google, Samsung, and Microsoft. I am glad that Tim Cook isn't as foolish as people like you think he might be on this front. You really might consider educating yourself a bit more on what's going on out there.

I have.....WSJ/CNBC has articles about "aadhaar" and also an article last week highlighting indian women being banned from smartphones by their male family members. Popular smartphones in india sell for between $70-$100 by chinese/korean makers in cutthroat competition leaving little room for profits. It's also funny that you mention aadhaar; they specifically invited apple to a meeting concerning its rollout this July and apple was a no show.....

Yep, WSJ/CNBC are a terrific source of info on Indian culture and mores. What does 'highlighting' mean in your parlance? Did they provide any empirical data on this supposed phone-snatching phenomenon, or was it a passing sentence or anecdote enough for your confirmation bias to kick in?

What "rollout" of aadhaar in July are you taking about? No one in the private sector is waiting on some government agency to "rollout" anything AFAIK. The digital ID system is already well in place, and the development of the mobile/app economy has zero to do with the government. Perhaps you really should look up the system...

Incidentally, "Popular smartphones ...[that].. sell for between $70-$100 by chinese/korean makers" are the norm just about every developing country. China was -- and perhaps still is -- no exception.

And all you did was pick one tiny piece of info in an otherwise broad post of mine.

It's quite alight if you have a negative views of India and Indians. You would be far from the first, in this forum. But you should back up your views and assertions with actual facts, and more importantly why you think you know more about this than the CEO of a $650B corporation who thinks, and says, that India is one of the biggest pieces of his company's future. The data and trends I see seem to agree with Cook, not you.