Apple Losing Ground to Android Competitors in India and China Due to Local Market Challenges

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A pair of reports out this morning highlight Apple's ongoing struggles in India and China ahead of the company's Q2 2018 earnings results coming tomorrow, May 1. Within India, Apple has been dethroned as the country's top selling high-end smartphone maker in the January-March period, losing out to Samsung.

Specifically looking at India's "premium price segment" (devices priced above 30,000 rupees, or $452), Apple's market share was at 18 percent in the first calendar quarter of 2018, compared to 45 percent in the year-ago quarter. Apple not only lost out to Samsung for the quarter (50 percent), but also to OnePlus (25 percent), according to numbers reported by Counterpoint Research (via Nikkei).

Apple has faced ongoing struggles over iPhone prices in India, with the Indian government raising the custom duty on imported mobile phones twice in under two months in an effort to get smartphone makers to build products locally. While Apple has set up an iPhone SE assembly in India, and is looking into doing the same for the iPhone 6s, the continued tax hikes have greatly hindered its expansion in the country.


Samsung, on the other hand, has been manufacturing its smartphones locally in India for almost ten years, and got a boost in Q1 thanks to interest in the Galaxy S9, S9 Plus, and A8 Plus.

"Apple is likely to continue facing trouble in India in the near to mid-term, until it has a relatively cheaper product," said Neil Shah, research director at Counterpoint.

Apple will have to partner with a local manufacturing company to bring down the price of its devices, Shah said. "It will have to introduce devices in the 50,000 rupees to 60,000 rupees range to lure Indian customers."

The fear of Apple's "excessive prices" also extends to China, where researchers forecast Apple will see continued weakness during its second fiscal quarter results this week (via Business Insider). UBS analysts Steven Milunovich and Benjamin Wilson predict iPhone sales to decline to as low as 47 million in fiscal 2018, dropping from a peak of 71 million during a "stellar" year of sales for the iPhone 6s in 2015. In 2015 Apple owned a 54 percent share of the Chinese smartphone market, which is predicted to decline to 37 percent this year.

Similar to India, Apple's problem in China is that local brands offer far cheaper alternatives for customers to purchase. Apple is also lacking distributors and promoters outside China's "Tier 1" and "Tier 2" cities (Shanghai or Beijing), where "local brands make extensive use of promoters to influence consumer decisions," Milunovich explained. He continued: "Oppo, Vivo, and Huawei have over 100,000 promoters each versus Apple with only 4,000."

“We think it’s doubtful China returns to its 2015 peak as local brands have caught up and upgrade cycles are lengthening; we expect a flattish market, give or take a few points of growth depending on the overall market and product cycle,” the UBS team told clients recently. “At the peak in 2015, we believe Apple likely had 40-50% share with Tier 1 and 2 consumers; we think that figure is closer to 20-30% today.”

Analysts are now waiting for a "supercycle" of user upgrades, meaning that a vast majority of Chinese iPhone owners would finally ditch their old models for a new update because of hardware additions that convince them it's time for the switch. As GBH Insights analyst Daniel Ives pointed out, this expected supercycle "keeps not happening" because users are holding onto their iPhones for longer periods of time, and also because recent iPhone generations lack compelling enough reasons to pay for the new version.

Now, researchers are looking toward the 2018 trio of iPhones to potentially become the catalyst for the supercycle. "Patience is wearing thin among investors on this elusive upgrade cycle with China playing a major role in the success or failure Apple will see over the coming year around this key product upgrade cycle," Ives said.

Tags: China, India

Top Rated Comments

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31 months ago

A large part of that is due to the customs duty imposed by the Indian government. I don't know if you are Indian or not, if you are, then you should be calling your local lawmaker and demanding that the government remove all customs duties. That will make the price of imported products on par with the West, minus shipping.

Why should the government reduce the taxes in the first place??
if apple wants to sell its product in India then produce it locally and you might be knowing India is the 2nd most populous country in the world and 2nd most number of internet users is present here thats more than 500 million people. apple needs us we don't need apple... we can have Samsung, One plus, HONOR, Xiaomi, google, etc etc etc....

do you know if India starts producing its products locally then the average buyer will save more than $250 per phone... and you can buy a whole new phone with these $250..
Score: 10 Votes (Like | Disagree)
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31 months ago
https://www.thetimes.co.uk/edition/business/apple-boss-tim-cook-mulls-400bn-payout-to-shareholders-73nsx353w

"Apple losing ground due to market challenges" is the most redundant and meaningless headline on Macrumors.

Of course they are losing ground due to market challenges -- that's why any company loses ground.

The truth is that Apple is losing ground because Apple has lost it's way.

They make weird, objectively bad, outdated laptops and their mobile presence is regressing. "Outrageously expensive phone with worse design and worse usability" is their big strategy, and the market has responded.

Apple will now literally pay shareholders not to run away -- that cash hoard that they could have used to invent the next great paradigm is now being used as bribe money to try to slow the fall of the share price as people catch wind of what they've done.

It's a sad chapter for a once great company.

Not with a bang but a whimper.
Score: 9 Votes (Like | Disagree)
Avatar
31 months ago
Taxes or no taxes, Apple is a frustrating entity in China. The after care is more like "we don't care" - the big selling point of Apple is the genius bar and the ease of fixing something when things go wrong, but in Shenzhen for example there is still only one Apple Store - while they've opened up at least 3 new ones in the past few years in (less populated) Hong Kong.

Mail in service also isn't an option, as it is in some other countries. If people have to queue for hours to get their stuff fixed, they're going to be turned off Apple and go for cheaper alternatives.

I got my battery replaced a few weeks ago - I queued for almost 45 minutes and it wasn't ready for a full day. Xiaomi offer battery replacements in under an hour, and at even less than the reduced fee Apple is charging. No wonder people are going elsewhere.
Score: 7 Votes (Like | Disagree)
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31 months ago
iPhone X has been a big Fail in India. Apple still likes to promote SE even today. Apple needs to sell iPhone not more than $700 (₹50,000) because anything higher is out of reach for worki g middle class. Even if they take EMI, there is no satisfaction in buying a $1400 iPhone in India. I mean seriously who in their right minds will buy a damn phone for $1400 ? I hope Apple gets it and prices their next iPhones at half the price.
Score: 6 Votes (Like | Disagree)
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31 months ago
While there are certainly many factors involved here - local production versus taxed import, level of direct in-country support, etc. - this demonstrates one glaring hole in the Apple armor. By focusing on the Phone as a primary device, at the perceived exclusion of other products (real or imagined), they are putting most of there growth eggs in one basket. The iPhone may have reached or even breached it pricing peak and may need to drop for future models. The price versus value perception has changed thanks to Samsung and others.
Score: 5 Votes (Like | Disagree)
Avatar
31 months ago
Apple screwed up with India about a year ago.

Tim Cook traveled to China, and kissed butt (not criticizing; that's part of the job of a CEO), which included pushing Uber aside to invest $1B in DiDi. ('http:// Didi: https://www.macrumors.com/2016/05/13/apple-didi-chuxing-electric-vehicle-plans/')

Around that same time period, he traveled to India and tried to sell their politicians on allowing Apple to bring used iPhones into their market. ('http://India: https://www.macrumors.com/2016/05/30/india-rejects-refurbished-iphone-sales/') No major investments. No stores. No manufacturing jobs. Used iPhones.

The Indian government was insulted and frankly, they're in the driver's seat. Apple needs India more than they need Apple.
Score: 4 Votes (Like | Disagree)

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