★ Apple Makes First iPhones in India (May 17, 2017)
Flipkart raises $1.4Bn from Tencent, eBay & Microsoft at $11.6Bn valuation, acquires eBay India – Economic Times (Apr 10, 2017)
There were recent rumors that Japan’s SoftBank might want to combine its investment in Snapdeal with an acquisition of Flipkart, but this funding news suggests that’s going to come later if it comes at all. The trio of companies investing here is intriguing. Tencent is perhaps the least surprising, as a company that invests heavily overseas including the US in minority stakes. eBay is apparently using this investment as a vehicle to buy into a bigger e-commerce business in India, as it’s transferring its own Indian operations to Flipkart as part of the process. Microsoft is the most interesting of all – though Flipkart recently switched to Azure for cloud services, Microsoft has no significant direct stake in an e-commerce anywhere else, so this is something of a departure for them, though of course major competitor Amazon already combines cloud and retail. Flipkart had in the past seemed to be the leader in the Indian e-commerce market, but has fallen from that role in the last couple of years as two overseas companies – Amazon and Alibaba – have made inroads there. This is a down round over the company’s previous valuation, but it and its new investors will be hoping the infusion of cash helps it get back into contention.
via Economic Times
The first part of this article gives too much credence to Xiaomi’s CEO’s projections about its future growth, taking them as given even though Xiaomi has struggled to meet its targets for smartphone shipments and growth for the last several years. But the rest of the article is interesting for what it says about where Xiaomi’s focus will be geographically going forward. Importantly, whereas one of the biggest questions about Xiaomi in recent years has been when it would come to the US, it seems to be moving in the opposite direction, doubling down on emerging markets like India rather than pushing into more mature markets. That will limit both its overall addressable market and the average selling price of its phones, given the disposable incomes in those markets and its product focus there, so Xiaomi’s future certainly won’t look very much like the one it projected a number of years ago, as a premium Android-based alternative to the iPhone.
I almost didn’t bother commenting on this news story, because it’s essentially identical to all the stories that were doing the rounds at several earlier times (see this previous comment, for example, from a month and a half ago). I honestly don’t know why the Journal published this story today, because it adds nothing to the earlier stories – same unnamed government sources, same details about Wistron being the manufacturer, and the same absence of on the record comment from anyone involved, least of all Apple. It’s entirely possible (even likely) that Apple is indeed planning to manufacture phones in India, but the fact that it hasn’t announced those plans yet suggests either that the plans aren’t fully baked yet or there’s some sticking point, which makes me curious what that is.
The Indian government shot down Apple’s previous attempt to sell refurbished phones in India, but it sounds like it’s giving it another try. That’s good, because these refurb phones are about the only way Apple is going to dramatically reduce the price of iPhones in India and break out of the niche premium market there and into the lower tiers of the market, where far more phones are sold. Between taxes and import fees, iPhones are actually typically more expensive in India than elsewhere in the world, even though what Apple really needs there is to sell cheaper phones, so re-selling used phones is the way to go. There’s still been no official confirmation from Apple of its plans to build iPhones in India, but if that really is on the table, it’s possible that Apple is using that investment as a carrot to persuade the government to allow it to pursue its other goals in India, including selling refurbished phones and opening its own retail stores. It’ll be fascinating to see if it succeeds in getting what it wants – the original reason for rejecting Apple’s earlier request was somewhat ridiculous, but the reasoning doesn’t matter as long as the government says no.
I haven’t seen any big US news outlets report this yet, and there’s been no official word from Apple, but several Indian publications are reporting that Apple has told officials in Karnataka that it intends to begin manufacturing iPhones through its partner Wistron in Bengaluru (Bangalore), in the province. Local manufacturing would help overcome some of Apple’s challenges in India, though certainly not all. They would help reduce prices by avoiding the import tax, and would allow Apple to permanently overcome the government’s ban on local retail for companies whose products aren’t made largely in India. That still leaves low incomes, tendencies towards thriftiness and favoring local brands, and other challenges for Apple in India, but it would be meaningful progress.
via Hindustan Times
Counterpoint Research has good data on the global smartphone market, and especially in emerging markets like India, so the numbers here are broadly reliable. India is a fascinating market – Apple and others have often compared it to China, but though the size is similar the demographics and wealth are very different, even if you compare India today to China a few years back. I’m not yet convinced that India is going to look like China does today anytime soon from a smartphone perspective, and that makes life very tough for a brand like Apple, which was tenth in the overall market share rankings. It did capture 62% of the premium market in Q4, but the premium segment is only a tiny fraction of the overall Indian market, which continues to be dominated by cheaper handsets, increasingly coming from Chinese vendors. You might be interested in this piece I wrote a few months ago about Apple’s prospects in India.
The Indian smartphone market has been characterized by unusually high loyalty to local brands, but that seems to be changing now as Chinese companies start to overcome the resistance to foreign vendors. For now, most of the action is still in the mid tier and below, but this helps erode the idea that one of the reasons Apple hasn’t done well in India is resistance to non-Indian suppliers. Chinese vendors, of course, have already done very well in other emerging markets, but it appears we can now add India to that list too.
This is an interesting new angle from Amazon as it tries to compete with homegrown competitor Flipkart in India. It’s a good example of Amazon’s flexibility in responding to local conditions in markets outside the US – unlike some other big tech companies, it’s not rigid about a particular business model, and instead experiments as necessary to find the right products and strategies to make each market work. It’s still an uphill battle, however, in many of these markets, notably China, while it does seem to be making progress in India.
Apple plans to make iPhones in Bengaluru from April – ETtech (Dec 30, 2016)
One of the barriers to Apple opening a retail presence in India has been that its products are not made there, and although there has been talk about a temporary lifting of that ban, Apple likely still needs to make iPhones in India in order to solve this problem over the long term. I haven’t seen others confirming these reports yet, so let’s take this with a pinch of salt for now, but it certainly seems plausible.
Apple seeks tax benefits, label law waivers to build iPhones in India & boost local sales – AppleInsider (Dec 29, 2016)
India is a market Tim Cook talks about a lot, as if it had the potential of China over the long term, and yet Apple’s presence there is minuscule for a host of reasons, not least much lower disposable incomes and regulatory barriers to a retail presence. However, Apple continues to chip away at these challenges bit by bit in an attempt to grow its business in India. I suspect we’ll still see slow progress there over the short to medium term.
Uber’s Drive Into India Relies on Raw Recruits – WSJ (Dec 22, 2016)
There’s been so much focus on Uber in China, which is obviously a massive market for ride-sharing, and where Uber has ultimately had to concede defeat. But there are interesting challenges with regard to expansion into other emerging markets like India.
Free Basics is an initiative that Facebook cares about, but it’s not necessarily massively important for its overall performance financially or otherwise. As such, this is an emotional setback, but not necessarily an important one. However, the reasons for the decision are indicative of broader concerns which Facebook should be more concerned about: increasing worries about Facebook’s power and the ways in which it shapes users’ experience of the Internet.