Apple is facing not just lower iPhone sales in India during 2018, but even a shrinking userbase as it deals with the likes of Android-based phone maker OnePlus, according to new research data.
Sales could fall from 2017's estimated 3 million units to 2 million, Counterpoint Research told Reuters. The iPhone's local userbase is meanwhile forecast to drop 10 percent to 9 million, a far shadow of 436 million Android users.
Half of the new iPhone sales are expected to come from older models, owing to the cost of the product in the country. Because the only iPhones assembled locally have been the SE and 6s, Apple is thought to import between 70 and 80 percent of what it sells, subjecting the company to high import duties intended to encourage local industry. Apple is the only major phone vendor which doesn't do manufacturing in India.
"Apple doesn't have enough confidence... in the Indian manufacturing system right now, to set up plants and move some of the manufacturing out of China," commented IDC analyst Navkendar Singh. "In the process they are losing around 15-20 percent of their tax incentive... which they could have passed on to the consumer."
Apple has traditionally declined to produce low-cost new phones, preferring to target "premium" customers. But even in the market of smartphones over $400, Apple reportedly sat behind Samsung and OnePlus in the September quarter.
OnePlus in particular is believed to be a rising challenger. The company is known for offering relatively high-end performance for a low price, and its latest device — the OnePlus 6T — is about half the cost of an iPhone XR in India.
In the past few months, about 10 to 15 percent of OnePlus' new customers have been switching from iPhones, the firm's Indian head told Reuters.
Apple has reportedly slashed the number of distributors in the country from five to two. Reuters sourced indicated that recent executive departures were likely linked to this.
Apple in India
Manufacturing the iPhone SE and possibly other devices in the future with expansion in India fulfills a number of conditions imposed on Apple as a condition of doing business in the future, along with providing tax breaks. However, the new demands that Apple is making in order to expand manufacturing in the country may pose a problem in the long run — or may just be a tactic that the government has used in the past of "leaking" information, and essentially negotiating through the press.
Assembly of the iPhone SE at the Karnataka Wistron facility began in mid-May of 2017. Officials in the Indian government hope the price for the iPhone SE will be cut over time by as much as $100 compared to the current local price, though Apple is likely to try and avoid too much of a reduction in order to preserve its margins. That price cut has not happened as of yet.
The first iPhone SE models built in India by Wistron went on sale in various cities around India in June of 2017. The devices are marked "Designed by Apple in California, Assembled in India."
As far as sales channels are concerned, Apple is considering flagship stores in New Delhi, Bangalore, and Mumbai — all three locations where most of India consumers wealth is centered. This is in addition to the Apple Authorized Reseller expansion that Apple was said to be examining in March 2017.
In January of 2018, the India government modified its taxation and sourcing laws that allow "single-brand retailers" that are foreign owned to temporarily meet a 30 percent sourcing requirement by buying goods made in India and selling them in other countries. The waiver is for five years, at which point, the company would be required to source 30 percent of its goods sold in retail stores from within the country.