Apple’s India Strategy Pays Off as the Country Is Now a Top 5 Market for iPhone

Apple (NYSE: AAPL) has put intense focus on the Indian market over the last year and these efforts now seem to be playing out well as the country is now among Apple’s top five markets.

According to Counterpoint Research, in the second quarter of 2023, iPhone shipments in India rose 50% YoY and the country accounted for 4% of global iPhone sales. The country has now overtaken European countries like France and Germany to become among the top five markets for iPhone.

Apple’s India strategy pays off as sales spike

The US is the biggest market for Apple iPhones followed by China, Japan, and the UK. According to Counterpoint Research, Apple had a 5.1% market share of the Indian smartphone market in the second quarter– which is the second largest in the world after China.

However, budget handsets dominate the Indian market with Samsung being the market leader. The bulk of the market is however with Chinese companies despite the ongoing troubles between the two neighbors who share a long and disputed border.

The spike in Apple’s India sales comes after the country opened its first two retail stores in the country – in Delhi and Mumbai respectively.

Apple’s CEO Tim Cook sees India as a big opportunity

After meeting Indian Prime Minister Narendra Modi during his India visit, Apple’s CEO Tim Cook tweeted, that Apple is “committed to growing and investing across the country.”

Notably, the opening of retail stores in India was a big step forward for Apple and analysts see it as a sign of the importance that it attaches to the country. Cook has talked up the potential of the Indian market multiple times previously also.

US tech CEOs including Cook, Microsoft’s Satya Nadella, and Alphabet’s Sundar Pichai met Modi on his state visit to the country. Cook described India as a “huge opportunity”

AAPL is diversifying in India

During the fiscal second quarter 2023 earnings call, Cook said that India is an “incredibly exciting market” and a “major focus” for the company.

Cook added, “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.”

According to Cook, “The switcher and first-time buyer metrics look very good there for India.”

In response to an analyst question on how the Indian market compares with China a decade back, Cook said, “I think each country is different and has their own journey, and so I hesitate to compare too much. But what I do see in India is a lot of people entering the middle class, and I’m hopeful that we can convince some number of them to buy an iPhone. And we’ll see how that works out. But right now, it’s working out well.”

AAPL is looking to increase sourcing from India

Apple is looking to increase sourcing from India and Foxconn, which makes most iPhones globally is expanding its footprint in India.

The Indian government said earlier this year that Apple would produce a quarter of iPhones in the country.

While that number looks farfetched, at least for now, analysts believe that Apple might source between 10%-15% of iPhones from India.

Responding to a question on shifting supplies from China, Cook said during the fiscal second quarter earnings call, “We’re investing in the U.S. We’re investing in a number of other countries as well. And so, we make products everywhere. We’ll continue to invest everywhere. And we’ll continue to look for ways to optimize the supply chain based on what we learn each and every day and week and so forth to ensure that we can deliver the best products and services for our customers.”

Apple’s sales in India have been strong

During Apple’s earnings call for the December quarter, Cook was upbeat on the company’s prospects in India and said it posted record revenues in the country in the quarter even as its overall revenues fell 5%.

During the earnings call, Cook said, “India is a hugely exciting market for us and is a major focus.”

He added, “We actually did fairly well through COVID in India, and I’m even more bullish now on the other side of it or, hopefully, the other side of it and that’s the reason why we’re investing there.”

Apple’s fiscal second-quarter earnings were better than expected

Apple reported revenues of $94.8 billion in the quarter that ended April 1. While the sales fell 3% YoY making it the second consecutive quarter of decline – they were ahead of the $92.96 billion that analysts expected.

Looking at the business segments, iPhone sales came in at $51.3 billion which is higher than the $50.5 billion in the corresponding quarter last year. The metric was significantly higher than the $48.84 billion that analysts were expecting.

Notably, while global smartphone shipments fell in double digits in the March quarter, iPhone shipments were only slightly lower over the period.

iPhone sales have been strong

Apple reported gross margins of 44.3% in the quarter which is ahead of the 44.1% which analysts expected. The company’s adjusted EPS of $1.52 also surpassed analysts’ estimate of $1.43.

As has been the case for three years now, Apple did not provide forward guidance. However, CFO Luca Maestri said, “We expect our June quarter year-over-year revenue performance to be similar to the March quarter assuming that the macroeconomic outlook does not worsen from what we are projecting today for the current quarter.”

Apple’s market cap surpassed $3 trillion

On the last trading day of June, Apple’s market cap topped $3 trillion based on closing prices. While the iPhone maker’s market cap surpassed $3 trillion in 2022 also, it failed to hold on to that level and the stock fell 27% during the year. Its market cap slumped below $2 trillion on the first trading day of 2023 but has since rebounded.

Incidentally, Morgan Stanley reiterated its overweight rating on Apple and is particularly bullish on the revenue opportunity in India. The brokerage expects Apple’s India revenues to grow at a CAGR of 20% and reach $40 billion in 10 years.

Going by the early signs, Apple’s bullish bet on India seems to be playing out well as the company continues to grow market share in the world’s most populous market.