beyondbrics

India may be the world’s second largest mobile phone market by users but so far it hasn’t been a major focus for Apple. In the absence of the iPhone, Samsung and BlackBerry have led the way in the country.

More recently, however, that has begun to change. Just as BlackBerry launches its first smartphone in India under the BlackBerry 10 operating system, Apple is joining the fray with a big push in the developing market.

The big problem for Apple is that the iPhone remains unaffordable for a large part of India’s population. A 64GB iPhone5 retails at Rs59,500. Compare that with annual GDP per capita which was estimated at Rs80,200 in 2011. And as Samsung offers its Galaxy models for as little as Rs6,110, Apple really can’t compete on price.

But the company has recently begun offering customers a monthly payment plan in an attempt to make its products more accessible, so the high cost can at least be spread out.

It has also changed its distribution model in India. Where it previously relied on telecoms operators to sell iPhones, it is now working with two distributors – Ingram Micro and Redington India to sell the phone directly to customers. This is a more expensive way to do things, but it does widen the company’s reach.

“Because of India’s geographical size, it makes sense to enlist the help of a distributors who can get to the lower tier markets as they have their own network of retail partners”, Jessica Kwee, an analyst at Canalys, the research group, told beyondbrics.

The next step would be to set up Apple stores in India but with strict rules on local sourcing for foreign investors in retail, tying up with distributors may be the only feasible option for now.

The third prong in Apple’s push is an expansion of its workforce, which has grown by 30 per cent in India over the past six months. An impressive growth rate but from a low base – the company’s total headcount in India remains under 200, according to Kwee.

Nonetheless, Apple’s efforts seem to be working. Kwee estimates that 260,000 iPhones were sold in India in the three months to December 31. That’s double what was sold in the same period a year earlier. But with Samsung selling 2m units in the same quarter, Apple still has a long way to go.

In the current environment, it is only logical that Apple should eye the Indian market. In a recent report, Canalys predicts that developing markets will contribute 70-80 per cent of growth in the global smartphone market in this calendar year. Taking India in particular, Research and Markets, a market research company, sees smartphone shipments rising from 11.2m units in 2011 to 73.4m in 2015. It says, in a recent report:

The mature Indian mobile consumers’ increasing preference for high-end handsets and the younger demographics’ desire to use mobile Web technologies could see the smartphone markets revenues soar… Growth in smartphones is likely to surpass the overall growth in the mobile handset industry. The segment is anticipated to continue its ride with a CAGR [compound annual growth rate] of 60% during 2011-2015, while the mobile handsets will register a CAGR of 13% in the same period.

Monthly payment plans and expanded workforces may allow Apple to chip away a little market share. But while many people can’t cover the cost of an iPhone with their entire annual earnings, Apple can’t expect to be the dominant player in India’s smartphone market.

Related reading:
Samsung teases Galaxy S4 launch event in March, FT
Apple dispute highlights investor dilemma, FT
Nokia to target EM smartphone sales, FT
Samsung to market India phone in China, FT