The iPhone in India

Writankar Mukherjee, reporting for the Economic Times:

Apple is set to relaunch the 8GB version of the iPhone 4 in the Indian market after losing sales and market share in the middle segment to rival Samsung in the last quarter after pulling out the model as part of a global strategy.

The US company, pressing hard to raise its market share in India, will price the device at around 15,000[$243.95] through buyback and EMI schemes compared with its old retail price of Rs 26,500, Apple’s four top trade partners in India said requesting anonymity due to confidentiality clauses. The model launched three years ago has been succeeded by the 4S, 5, 5c and 5s, the last of which starts at Rs 53,500[$870.03].

The company’s decision to stop selling the 8GB iPhone 4 in the last quarter to push its latest devices helped the company gain value share but meant ceding ground in unit sales, with the 5c not reaching expected numbers and the company having no presence in the sub- 30,000 segment. “Apple’s iPhone 4 8GB model used to rank amongst the top three selling models by unit sales and fight neck and neck with Samsung, but with its exit the company lost much ground,” said a senior executive at a top electronic retail.

This (assuming the report is true) is similar to what Apple is doing in China, where they are still selling the iPhone 4, despite discontinuing the device in other markets.

This report arrives on the heels of another article from the New York Times, highlighting the iPhone in India:

In 2013, Apple wakened to the potential of the world’s fastest-growing smartphone market. India also happens to be the second-largest mobile market, with 800 million active users. “Apple sees that the market is at a takeoff point. Sales numbers could get serious within a year or two,” said Anshul Gupta, a Mumbai-based principal analyst for mobile devices at the research firm Gartner. Apple’s shipments have doubled from 2012 and will surpass a million phones in 2013, Mr. Gupta said.

In a price-sensitive country where multinational corporations sell bottles of soda for 16 cents, pizzas for 75 cents and burger meals for $1.40, basic cellphones have dominated the landscape. Smartphone penetration is less than 20 percent of the phone-using public. But a combination of falling prices, fast 3G speeds and a thriving app ecosystem is fueling the adoption at ripping speeds.

With that kind of energy, this is a market where Apple can no longer afford to be a fringe player, selling to an elite few and losing out to pushy rivals. It is also a market where 80 percent of smartphones sell in the range of $70 to $200, said Mr. Gupta, the Gartner analyst. High prices have kept Apple at the tail of the top 10 brands by sales, way behind No. 1 Samsung, which sells more than three-quarters of its phones for less than $400, and No. 2 Micromax of India, whose most expensive phone is $350. The cheapest iPhone costs about $525 in India.

Back in August, when I interviewed Bangalore-based iOS Developer, Anirudh Coontoor, I asked him about what he thought about Apple’s efforts in the Indian Smartphone Market and the then-rumored iPhone 5c:

Until recently, Apple had not made any significant effort to increase the iPhone presence in India. As a result, India is dominated by Android and the iPhone’s presence is negligible. It’s tough to compete with Android phones which start at Rs.10,000 [$162.64] which are half-decent when Apple’s offerings started at Rs.26,000 [$422.88]. There are no carrier subsidies in India, so customers have to pay the full price. But, around six months ago, Apple really started marketing the iPhone and the iPad. They run full page ads on the front page of major Indian newspapers, several times a week. They have also started a buy back program. Anyone can trade in their old smartphone and get Rs.8000 [$130.13] off on the purchase of the iPhone 4 (which retails for about Rs.26,000[$422.88]). So that is really driving sales, as evident in the Q3 earnings, where Apple revealed that there was a 400% increase in India sales.

He also shared his concerns about supporting the older devices:

It’s great that Apple is selling more iPhones, it gives us a larger customer base, but it worries us if the majority sold are the 3 year old iPhone 4, which is harder to support. It will be great if Apple introduces a cheaper iPhone, with updated internals compared to the iPhone 4. As I mentioned earlier, the iPhone 4 retails for Rs.26000[$422.88] which is still expensive, you can get a capable Samsung Android phone for about Rs.10000 [$162.64]. If Apple can introduce an iPhone for Rs.15000 [$243.95] then they can make a real impact and take away some steam from Android.

We’ve seen how iOS 7 performs on the iPhone 4 and its not ideal. Will the iPhone 4 support iOS 8? Given Apple’s release cadence, I’d venture to say it’s unlikey1, given that 2009’s iPhone 3GS received its final software update in March of 2013, 3.75 years after its launch, and the iPhone 4 is 3.5 years old as of January 2014.

But let’s ignore the specs, the software version, the difficulty for developers to bring new features to old devices, the tech press, the power users, and the economics columnists of the world and consider the following:

An old smartphone that can run apps is still a smartphone that can run apps.

As evidenced by the emergence of a booming secondary market for iPhones in developing countries, there are many people who just don’t care about getting the latest, greatest smartphone, they just want a smartphone that has access to the apps and services they use. And in many cases, they’d rather have an iPhone. From Jon Russell’s report on The Next Web:

In parts of Southeast Asia in particular — including Vietnam, Thailand, Cambodia, Indonesia and other places where smartphones are not subsidized widely (or even at all by carriers) — consumers have found a way into Apple’s ecosystem by purchasing older devices or units refurbished by unofficial Apple shops.

These shops, which are often little more than kiosks in busy IT malls, have sprouted up to spread the distribution of iPhones into a new layer of consumers — those who desire but can’t afford high-end products. Other than selling fixed-up iPhones, they also carry Android devices and a diverse array of tablets and smartphones.

Many consumers visit IT malls to shop for a deal on an older smartphone. For example, an iOS 7-powered iPhone 42 that is refurbished in-house, typically sells for around 4,000 THB (circa $120) — that’s a far lower price than the iPhone 5s and its 23,900 THB ($720) price tag, but older devices like the iPhone 3G are also popular. Similar offers can be found in other Southeast Asian countries.

You read that correctly: There are people who are choosing to buy a secondhand, five-year-old, hasn’t-received-a-software-update-since-2010 iPhone 3G as their primary, day-to-day device because it does what they need it to do.

It seems that this idea of "it does what I need it do" is a defining characteristic of the lower-end of the market. It’s certainly something that seems to be key in India. From the New York Times story:

“Micromax is giving India what it wants: more bang for the buck,” Rahul Sharma, its co-founder and chief executive, said in a phone interview. “Most Indians don’t walk into a store asking for a smartphone; they go, “Bhaiyya, isme chat chalega?” (“Brother, will the chat apps work on this phone?”)

With the iPhone 4 on the market, Apple can reply; “Haan bhaiyya, chalega.” (“Yes, they do.”)

  1. Which will cause ignorant folks, like Catherine Rampell, to cry “planned obsolescence”. Debunked. Debunked. Debunked. I don’t even know why I’m linking to this nonsense. 

  2. For the record, I used an iPhone 4 as my primary device in India for about two weeks back in June of 2013. It was a pretty good experience considering I was coming from an iPhone 5, and it was certainly more useful than the Nokia dumbphones my parents were using. I was able to check email, use Twitter, Facebook Messenger, Instagram, and use Personal Hotspot with my iPad when I didn’t want to pay for hotel WiFi. The worst part of my experience was getting stuck on 2G networks when I was traveling through the countryside. 

  1. rajamreport posted this