HONG KONG (Reuters Breakingviews) - Apple is planting the seeds for India's iPhone awakening. The $695 billion company is nearing a deal to assemble its iconic phone in Karnataka, a southwestern state in one of the world's fastest growing handset markets. That would help lower retail prices and boost potential sales at a time when the Cupertino-based firm is losing its footing elsewhere in Asia.
India's smartphone market will expand at an average rate of 18 percent annually until 2020, estimates data tracker IDC. To compare, shipment volumes in China grew by half that rate last year and consumers there are switching to local brands. IDC reckons Apple's market share in the People's Republic dropped to 9.6 percent in 2016, from over 13 percent the previous year.
The challenge in India is to increase the size of the addressable market. Premium phones over $500 account for less than 2 percent of smartphones. Apple dominates this segment and sold 2.5 million units in India last year, according to Counterpoint Research. That is impressive considering an iPhone retails for more in India than in the United States because of high import taxes and a lack of carrier subsidies.
Assembling handsets locally will help keep a tighter lid on costs. In return for agreeing to "Make in India", and helping Prime Minister Narendra Modi create jobs, Apple may hope New Delhi will relax rules that currently prevent it from importing old phones.
Selling refurbished models, such as the iPhone 5S, would make Apple handsets affordable to more people. The hope is these early customers will eventually upgrade to the latest models as incomes rise. It would also allow Apple to compete with local and Chinese rivals like OPPO and Huawei.
In the meantime, Apple is close to opening a store in the country. So even if the company can't significantly lower prices or expand its market, a more visible presence will help ensure the brand is one people aspire to own. That is key to Apple's future in India.
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