Tuesday
Feb142017

Apples to India?

Unless smartphones start to speak in tongues—multiple tongues—India will not be Apple’s next China.

After visiting China earlier this year Apple CEO Tim Cook went to India and declared India the new China.

“I sort of view India as where China was seven to ten years ago,” he was quoted as saying. 

Sounds uplifting for Apple and for India. Only India is not like China was a decade earlier. And Apple’s share of the market is not growing in India. It doesn’t have a strategic partner like China Mobile. Distribution is a nightmare.

Reuters

Getting India’s mom and pop electronics stores to sell iPhones in small towns is like push-marketing Chicken Masala to a chain of Swiss fondu restaurants.

Unlike its entry into China, Apple faces a big wall in India, taller than the wall Mexico is being instructed to build by Donald Trump and longer than China’s Great Wall. Apple, I suspect, thinks there’s a billion possible iPhone customers in India but let’s do the numbers. 

First, most people who want a smartphone in India want to pay below $50 rather than above $400 or $500, where Apple is likely to be priced, even if it manufactures iPhones in-country, as it has recently indicated it will. In Chennai, Kolkata and Mumbai some Chinese and Indian models already go for $30. In India 40% of the population doesn’t even have a TV set. (See any iPhones in the photo above? And these aren’t even rural users.)

Second, even in China, Apple’s share of the smartphone market has recently dropped by half. Plus Chinese GDP per capita was higher 10 years ago than India’s is today. And China’s households are smaller than India’s, due to Mao’s population policy, which—did he imagine?—fosters higher education levels, more disposable income and more buying of smartphones.

Who would have guessed that population control impacts Internet use in such a marked way? History matters. And who assumed in 1980 that the breakup of AT&T and its Bell Labs would lead to the creation of Apple—an Apple that may today be as far from understanding the Indian rural consumer as AT&T, with its 18 layers of management, was from understanding the American consumer.

Third, China has a more uniform population language-wise than India (though not 100% uniform by any means). Only about 10% of India’s 1.2 billion people are fluent in English, with another 15% having some understanding. Beyond English, Hindi and Tamil, the language groupings get smaller and smaller. (So can’t they manage the Internet in English, you ask. Try using your smartphone in your second or third language and you’ll know the answer.)

So how will Apple bring Apples to India? How does it make them cheaply enough for a market where the average mobile account generates less than $2.00 per month? What is the smart way to India’s smartphone market?

Within a few weeks of Cook’s visit to India—and his meeting with Prime Minister Modi—the government announced it would lift the restriction on foreign investors in the retail sector having to source at least 30% of their products in India. Apple could have a handful of stores in high-end shopping malls. It will reach high-end consumers more directly.

But this will not by itself fix the India-China paradox. Even though the educated youth of the population usually knows English, iPhones will be shared across the family once they reach beyond the middle class. They won’t be affordable otherwise. This brings up the speaking in tongues part.

The growth in Hindi web content in India outpaced English 5 to 1 last year. Apple needs to diversify linguistically. Not just apps in Hindi apps, as most Indians do not speak this as a first or second language but apps in Bengali, Telegu, Tamil and the country’s 25 other major languages, if India is to be the next China.

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