Mobile news

India at tipping point, says Tim Cook


New Delhi: In the early hours of Friday India time, Apple announced its earnings for the March quarter, announcing a 3% annualized revenue drop to $94.8 billion. However, the company beat Wall Street estimates, while also registering a record March quarter revenue in India. Tim Cook, chief executive of Apple, said in a post-earnings analyst call that the company’s India revenue registered a double-digit growth—adding further that the company’s India business is “at a tipping point.”

New Delhi: In the early hours of Friday India time, Apple announced its earnings for the March quarter, announcing a 3% annualized revenue drop to $94.8 billion. However, the company beat Wall Street estimates, while also registering a record March quarter revenue in India. Tim Cook, chief executive of Apple, said in a post-earnings analyst call that the company’s India revenue registered a double-digit growth—adding further that the company’s India business is “at a tipping point.”

“Overall, I couldn’t be more delighted and excited by the enthusiasm I’m seeing for the brand there. There are a lot of people coming into the middle class, and I really feel that India is at a tipping point, and it’s great to be there,” Cook said.

“Overall, I couldn’t be more delighted and excited by the enthusiasm I’m seeing for the brand there. There are a lot of people coming into the middle class, and I really feel that India is at a tipping point, and it’s great to be there,” Cook said.

Subscribe to Continue Reading

The top executive completed a whirlwind tour of India last month, opening doors to two of Apple’s first own physical retail stores in Mumbai and Delhi. The company had so far operated in the country through third-party retailers in the physical retail space. It opened its own online store in India in September 2020, prior to which its online sales were also entirely through third-parties. The latter remain active in India alongside Apple’s own retail ventures.

While Apple does not share geography-wise numbers, the company has shared consecutive quarters of strong growth in India. On February 3, Cook said in the December quarter analyst call that it achieved an all-time high revenue in India—following it up with a quarterly revenue record in the March quarter.

“It (India) is a major focus for us. I was just there, and the dynamism in the market, the vibrancy, is unbelievable. Over time, we’ve been expanding our operations there to serve more customers… We’ve got a number of channel partners in the country as well that we’re partnering with, and we’re very happy with how that’s going,” Cook added.

On overall terms, Apple’s iPhone revenue grew 2% annually to $51.3 billion, setting a new March-quarter record. Overall product revenue stood at $73.9 billion, down 5% annually, while services revenue set an all-time revenue record of $20.9 billion. Luca Maestri, chief financial officer of Apple, said that the company faced a negative impact of 5 percentage points from foreign exchange fluctuation, which is “in line” with expectations.

According to Bloomberg data, Apple beat Street estimates in revenue, earnings per share of $1.52 per share, and iPhone and wearables revenue. However, Mac and iPad revenue fell below expectations, while so did Apple’s services vertical—despite setting an all-time record. Cook added during the call that the company now has 975 million active subscriptions under its services arm.

Apple shares were up 2.9% to $170.58 in pre-market trading, at press time. The stock closed at $165.79 on Thursday in the US.

Apple’s growth in India comes at a time when the overall smartphone and consumer electronics market in India is undergoing a period of prolonged slump. On May 4, market researcher International Data Corporation (IDC)’s quarterly smartphone market report pegged a 16% annualized decline in smartphone shipments in India, even as the premium smartphone market—comprising devices priced at 50,000 and above — grew to 11% of all smartphones shipped during the quarter, up from 4% in the year-ago period.

According to analysts, Apple’s shipments continue to grow on the back of strong demand for its iPhones. Data sourced by Mint from market researcher Counterpoint India said that Apple shipped around 2.1 million iPhones in the March quarter, up from around 1 million iPhones one year ago. The company registered a growth of around 25% in its overall 2022 shipments, when it shipped around 6.5 million iPhones last year — its highest annual shipments to date.

“Going forward, we project Apple to potentially ship around 9 million iPhones in 2023, which could account for another record for the brand, as well as a shipment growth of around 30%,” said Tarun Pathak, research director at Counterpoint India.

Navkendar Singh, associate vice-president of devices research at IDC India, also offered a similar projection. “Apple is presently at the sixth or seventh spot in terms of device shipments to India, but this proximity means that it is not entirely impossible for Apple to break into the top-five retailers list in India, at some point this year. This could see the company ship up to 9 million units this year,” he said.

Doing so would be a significant moment for Apple, which has long been a bit-part player in the world’s largest smartphone market. IDC data estimates Apple to have shipped around 2.7 million iPhones in all of 2020, which nearly doubled to 4.8 million in 2021, and grew another 35% to 6.5 million last year. Despite this growth, while it ranks far behind market leader Samsung in terms of market share by volume, Counterpoint’s Pathak said that Apple already ranks second in terms of market share by revenue — a factor that could contribute materially to its global hardware revenue, if it climbs further up the market share ladder.

Pathak said that the company is likely to see steady growth in the country for another three years. “If you look at our market, we have nearly 500 million smartphone users that are using smartphones priced at less than 20,000. The biggest factor in the market right now is that consumers are looking to upgrade — so, even if 10% of the smartphone user base upgrades, we’re looking at 50 million new users for price segments of sub- 30,000, or above that. This is most likely the opportunity that Cook spoke about during the earnings call,” he said.

Retailers, too, said that there is an increasing amount of interest in iPhones. A top Delhi retailer, who requested anonymity, said that there has been an increase of nearly 30% in user interest in iPhones in the past six months — driven by a rising demand for Apple’s iPhone 14 series. He added that Apple maintaining parity in the pricing of its iPhones over the past three years, coupled with premium phone prices of Samsung and OnePlus going up incrementally, has been a factor for which more buyers are considering Apple’s iPhones in the country. The additional availability of easy financing options as well as seasonal and bank-linked discounts further added to its rise in shipment figures.

Manish Khatri, partner at Mumbai-based retailer Mahesh Telecom, also said that there has been a clear rise in demand for iPhone 14 and 14 Plus, while demand for Samsung and OnePlus’ phones have remained flat.

However, this does not come without challenges. Going forward, IDC’s Singh said that maintaining the growth pace will be Apple’s biggest challenge.

“There has to be a ceiling at some point of time. Apple’s iPhones age well, and come at a price point of between $800-1000 (around 65,000-80,000). At this pricing, it’s very difficult for a brand to maintain volumes in terms of replacing their phones every two or three years. This is why we’ve seen iPhones to be the bestseller in India’s second-hand devices market. But, the appetite in India for premium products is only so much — it is still a decent number from Apple’s point of view, which makes India an important strategic market for it,” Singh said.

As a result, the growth rate of over 30% annually could be short-lived. But, Apple’s per-device margins are nearly 10 times that of its rivals — on January 6, Mint reported that Apple earns around 25,000 for every iPhone priced at around 80,000 (the price of its entry-level new-generation model). In comparison, the likes of Samsung and Xiaomi earn around 2,000 per device. This, according to Singh, could have an exponential growth impact on the brand’s India business.

“The mass-market smartphone segment of below 25,000 is not growing, leading to degrowth of the overall industry. But, what is growing is the 50,000 and above segment, and we’ve seen Apple sell the iPhone 13 at close to 50,000 last year, which helped its shipments. So, there would be a growth ceiling because Apple will not play at the mass-market price segment in India. The growth of MacBooks in India has also been decent — the price disparity between its laptops and Windows laptops has come down, and we’ve seen some growth for them in the commercial segment, too,” he said.



READ SOURCE