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Apple& # 39; s (NASDAQ: AAPL) the latest iPhones have finally arrived and they are more expensive than ever. The entry-level iPhone XR costs $ 50 more than the iPhone 8 from last year and $ 100 more than the cheapest version of the iPhone 7 , launched a few years ago.
We understand why Apple follows this strategy to offset the weak growth in unit sales by increasing the average selling price of the iPhone range. The company's revenues increased by 15% in the first nine months of the current fiscal year, although unit sales of iPhones were relatively stable year-over-year.
However, such an initiative will prove costly for Cupertino in India – the second largest smartphone market after China – where it failed to gain a foothold. Here's why.
Source of image: Apple
Incredibly expensive
The iPhone X was a very expensive product in India. Last year, it was launched at a base price of about $ 1,400 in India, well above the retail price of $ 999. Indeed, India was the second most expensive country to buy an iPhone X, thanks to import duties and a weak currency.
Not surprisingly, Apple lost ground in the Indian smartphone market last year. In the second quarter, the company's share in high-end smartphones in India fell to 13.6 percent from 29.6 percent in the year-ago period, according to counterpoint research. Apple has delivered 40% fewer iPhones in India in the first six months of 2018 than a year ago, with OnePlus and SamsungPhones occupy the first two places thanks to a smart price and product strategy.
For example, the 128GB version of Samsung's latest Samsung Note 9 device costs about $ 940 in India at the current exchange rate. That's less than the price of $ 999 that the same version wears in the United States. The South Korean technology giant has managed to keep the Indian price at a level comparable to the international one thanks to its presence in the country.
Samsung is serious in the Indian market, which is why it recently opened the largest smartphone production site in the world at the beginning of the year. Such a move should help Samsung optimize local sourcing of components and ignore the costs it would have had to pay if phones were imported. As such, the smartphone giant can maintain price competitiveness and offer better value for money than Apple, whose latest pricing and product strategy indicates that it is about to lose more land in India.
A defective strategy
With the launch of the new line of iPhones, Indian consumers will now have to invest more in the iOS ecosystem. The cheapest version of the "entry-level" iPhone XR will be marketed in India at a price of about $ 1,065 (or 76,900 INR). This is a massive premium of 42% over the price at which it will be sold in the United States, thanks to import fees and the lowest rupee.
If Apple had seriously considered aggressively building its manufacturing operations in India, the iPhone XR would have been a lot cheaper than the Samsung Galaxy Note 9. What's more, the iPhone XS, which costs the states $ 999 For the 64 GB version, the price is identical to the Galaxy Note 9, will be sold in India with a premium of nearly 40%.
Instead, the company began manufacturing the iPhone 6S 3 years ago in India about three months ago, making it the most affordable iPhone for Indian customers, with a local price of over $ 500. Approximately $ 414 (29,900 Indian rupees converted at the current exchange rate). ) for the 32GB model. In addition, Apple seems to have ended the iPhone SE, which is no longer mentioned on the company's Indian site.
Apple makes additional mistakes. The iPhone SE was the ticket of the Indian consumer for the iOS ecosystem, thanks to a price of less than 275 dollars. This entry-level device has enabled smartphone buyers in India to experience the Apple ecosystem. With this fashionable device and an obsolete device priced at a price close to that of Android, like the OnePlus 6, which offers better specs and more storage, the iPhone 6S will not move the Apple needle into India.
Missed
A new generation iPhone SE with better specifications and a slight premium on the outgoing device would have helped Apple to integrate new smartphone users. This would have given the company a better chance to sell its high-end phones to Indian consumers in the future and to establish itself in a country whose per capita income should double over the next ten years.
However, Apple's strategy of focusing on pricing rather than volume, even in a fast growing smartphone market such as India, will not create a loyal user base that could have long term, thanks to increased purchasing power.
Harsh Chauhan has no position in the mentioned actions. The Motley Fool owns shares and recommends Apple. The Motley Fool offers the following options: long calls from January 2020 to $ 150 and short calls from January 2020 to $ 155 on Apple. Motley Fool has a disclosure policy.
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