The status of Apple Inc. (NASDAQ:AAPL) in world’s second-largest smartphone market is casting vivid impressions. Despite facing stiff competition from the Chinese players in Indian smartphone market, Apple grew its net profit in the country by 44% at Rs 373.4 crore for the year ended March 2017, according to the company’s latest regulatory filings made to Registrar of Companies (RoC). As per Economic Times reports, the company’s total income in India surged by 17% to Rs. 11,704.5 crore in FY 2017, up from Rs 9,997.6 crore in the previous fiscal.
However, Apple’s overall sales growth has dropped significantly from over 40%, as reported for the past 5 years. This was due to the strong dominance exhibited by the Chinese makers including Xiaomi, Oppo and Vivo who are known for their competitively priced high-specced devices. Apple also lost its top spot to Samsung in India’s premium smartphone segment in Q1 2018, putting it behind the Korean giant and Chinese maker OnePlus. This was caused due to a drop of 55% in volume due to decline in shipments of its latest flagship device iPhone X and iPhone 8.
Increasing profitability amid declining sales is a direct reflection of the high-profit margin of Apple products and the rise in the average selling price (ASP) of smartphones. The ASP of smartphones has gone up by 19% YoY for the second consecutive year, indicating a change in buying trends as more Indian customers are now opting for higher priced phones. Also, the customs duty on phones has been hiked to 20% which will raise the price of iPhones in India.
Despite the declining iPhone X sales, Apple dominates the industry with 86% share of the total global handset profit in Q4 2017. Surprisingly, iPhone X alone accounted for 35% of the total handset industry profits during the same quarter.
Apple started manufacturing iPhones in India last year, aligning with the Make In India initiative, and it has helped the tech giant to meet local sourcing requirements. Apple’s strategy for India is starting to pay off and will become evidently clear in future as analysts believe that Apple’s growth will continue in the country in 2017-18 owing to highly profitable models in its portfolio. Also, the sales trend is gonna continue in almost same fashion as India’s sales growth will be comparatively low in 2017-18 due to fierce competition from OnePlus and Samsung who are currently dominating in the premium smartphone segment.
In the just-concluded fiscal, the share of Chinese brands in India has spiked to 57% of the total smartphone market in Q1 2018, up from 53% year ago, as per Counterpoint Research. The premium segment market accounts for only 4% of the total Indian smartphone market, and moreover, Apple is still popular among a small fragment of country’s 1.35 billion populace. Apple accounts for only 2.5% of India’s overall smartphone market.
The Silicon Valley giant is pushing its FY17 profit to its India endeavours, with an aggregate surplus of Rs 1556.5 crore. Surprisingly, it is about ten times the annual profits of Xiaomi, Oppo and Vivo, collectively generated in FY 2017. Though Xiaomi was the only profitable company in India, which generated a net profit of Rs 163.9 crore in FY 2017. The investment will be used for further expansion of local operations.
