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Apple (AAPL) Commences iPhone Assembling Operations in India
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Per media reports, Apple Inc (AAPL - Free Report) has finally commenced assembling operations in India. The company started assembling a small batch of iPhone SE at the Bengaluru facility operated by its contractor, Wistron.
Reports further add that Apple will start shipping the iPhones to local customers as soon as this month.
Though there is no official word on the matter from Apple or Wistron, it had been reported earlier that the Cupertino giant was initially likely to assemble only 0.3-0.4 million units of iPhone SE. Analysts observe that it is prudent on Apple’s part to begin assembling its most economic iPhone offering, SE, which was launched to cater to cost-sensitive markets like India.
Why is Apple Keen on India?
Since the last year, Apple has been increasing its focus on India to claim a greater share of the vast smartphone market, of which it reportedly holds only 2% currently. The company faces slowing iPhone demand in most of the regions, either because of competition or regulatory hurdles (as in the case of China) or market saturation (as in the U.S).
Therefore, it makes sense for the company to solidify its position in India, which is projected to become the second largest smartphone market in the world. Per media reports, in the first quarter of 2017, smartphone penetration in India was 16% compared with 3% growth globally.
In the last reported quarter, Apple’s sales in India grew by double digits. In fiscal 2016, sales grew approximately 50% over the prior fiscal.
With Narendra Modi at the helm, the tagline of “Make in India” is fast catching up with global manufacturing giants. The Apple deal could open doors for other global players to set up their manufacturing units in the country. However, China still remains a major contender in the manufacturing space.
India presents an attractive growth opportunity for the company over the long run, given its younger population and increasing investment in 4G network infrastructure (launch of Reliance Jio has given the much needed impetus). Apple has also partnered with Reliance to provide its Jio (a unique all-IP network) service for free with the new iPhones.
The recently outlined FDI policy also bodes well for the company as it eliminates the requirement to locally source products for at least a three-year period. This will enable Apple to open its solely-owned retail stores in India. Thereafter, the company will have to comply with the rule.
Market Fraught with Challenges
The market is highly cost sensitive. Reportedly, the majority of the smartphones sold are priced around INR 10K (roughly $145). iPhone 7, on the other hand, costs almost five times more. Even iPhone SE is priced at INR 30K. The lion's share of Apple’s revenues in the country comes from devices that are a couple of generations old. Newer models have relatively low demand given the hefty price tag. A few days back, it was reported that the Apple team in India is trying to increase revenues to $3 billion by 2017–18. By local assembling operations, the company can start to operate its own retail outlets and avail a 10% tax benefit. This should lower prices.
Plus, Apple’s rival, Samsung, along with a few Chinese smartphone makers, dominates this market. Samsung has long been in the market. With reportedly 23% share, it is a leading player in the country. Apple is quite late to the party.
Also, Apple’s lack of focus on regional customers’ demand is a concern. India is categorized by handsets that work on dual SIMs. Apparently, Apple is not keen on making dual SIM handsets. This could be a very big impediment to growth in the country.
Despite the pros and cons, Apple is expected to continue its India drive. It will be taking up a lot more initiatives this year. However, whether those initiatives yield desirable results remains to be seen.
Apple, of course, is not the only tech player eyeing India for growth. Given the potential of this market, Silicon Valley’s interest is well understood. From Microsoft Corp. (MSFT - Free Report) and Alphabet (GOOGL - Free Report) to Facebook Inc. , all remain laser focused on the market.
Over the past one year, shares of Apple have registered growth of 59.97% compared with the Zacks Computer Mini industry’s gain of 59.08%.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Apple (AAPL) Commences iPhone Assembling Operations in India
Per media reports, Apple Inc (AAPL - Free Report) has finally commenced assembling operations in India. The company started assembling a small batch of iPhone SE at the Bengaluru facility operated by its contractor, Wistron.
Reports further add that Apple will start shipping the iPhones to local customers as soon as this month.
Though there is no official word on the matter from Apple or Wistron, it had been reported earlier that the Cupertino giant was initially likely to assemble only 0.3-0.4 million units of iPhone SE. Analysts observe that it is prudent on Apple’s part to begin assembling its most economic iPhone offering, SE, which was launched to cater to cost-sensitive markets like India.
Why is Apple Keen on India?
Since the last year, Apple has been increasing its focus on India to claim a greater share of the vast smartphone market, of which it reportedly holds only 2% currently. The company faces slowing iPhone demand in most of the regions, either because of competition or regulatory hurdles (as in the case of China) or market saturation (as in the U.S).
Therefore, it makes sense for the company to solidify its position in India, which is projected to become the second largest smartphone market in the world. Per media reports, in the first quarter of 2017, smartphone penetration in India was 16% compared with 3% growth globally.
In the last reported quarter, Apple’s sales in India grew by double digits. In fiscal 2016, sales grew approximately 50% over the prior fiscal.
With Narendra Modi at the helm, the tagline of “Make in India” is fast catching up with global manufacturing giants. The Apple deal could open doors for other global players to set up their manufacturing units in the country. However, China still remains a major contender in the manufacturing space.
Apple Inc. Price
Apple Inc. Price | Apple Inc. Quote
India presents an attractive growth opportunity for the company over the long run, given its younger population and increasing investment in 4G network infrastructure (launch of Reliance Jio has given the much needed impetus). Apple has also partnered with Reliance to provide its Jio (a unique all-IP network) service for free with the new iPhones.
The recently outlined FDI policy also bodes well for the company as it eliminates the requirement to locally source products for at least a three-year period. This will enable Apple to open its solely-owned retail stores in India. Thereafter, the company will have to comply with the rule.
Market Fraught with Challenges
The market is highly cost sensitive. Reportedly, the majority of the smartphones sold are priced around INR 10K (roughly $145). iPhone 7, on the other hand, costs almost five times more. Even iPhone SE is priced at INR 30K. The lion's share of Apple’s revenues in the country comes from devices that are a couple of generations old. Newer models have relatively low demand given the hefty price tag. A few days back, it was reported that the Apple team in India is trying to increase revenues to $3 billion by 2017–18. By local assembling operations, the company can start to operate its own retail outlets and avail a 10% tax benefit. This should lower prices.
Plus, Apple’s rival, Samsung, along with a few Chinese smartphone makers, dominates this market. Samsung has long been in the market. With reportedly 23% share, it is a leading player in the country. Apple is quite late to the party.
Also, Apple’s lack of focus on regional customers’ demand is a concern. India is categorized by handsets that work on dual SIMs. Apparently, Apple is not keen on making dual SIM handsets. This could be a very big impediment to growth in the country.
Despite the pros and cons, Apple is expected to continue its India drive. It will be taking up a lot more initiatives this year. However, whether those initiatives yield desirable results remains to be seen.
Apple, of course, is not the only tech player eyeing India for growth. Given the potential of this market, Silicon Valley’s interest is well understood. From Microsoft Corp. (MSFT - Free Report) and Alphabet (GOOGL - Free Report) to Facebook Inc. , all remain laser focused on the market.
Zacks Rank & Share Price Movement
At present, Apple has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past one year, shares of Apple have registered growth of 59.97% compared with the Zacks Computer Mini industry’s gain of 59.08%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>