A Gamechanger for Apple in India
Apple drastically slashed prices on the iPhone 12 series, and sold 200,000 iPhones, worth $120 million in one day.
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Apple, known for never compromising on prices, just did. I got the iPhone 12 Mini for $500 (₹37,500) at a sale by Flipkart. The phone currently sells for $629 in the US Apple Store and $800 (₹59,900) in the Indian Apple Store.
iPhones are exorbitantly priced in India because of import taxes. This means an iPhone 12 here costs more than iPhone 13 in the US. Six months ago, my brother $1,725 (₹129,000) for a 256GB iPhone 12 Pro. As against $1,599 (₹120,000) for the latest top-of-the-line, iPhone 13 Pro Max (1TB) at the US Apple Store
Flipkart later announced they had sold 200,000 iPhones on the first day of the sale, which translates to $120 million if you take the average price of the iPhone 12 series to be $600 (₹45,000). Apple’s performance was impressive for a company that, when last checked, had only around 1% of India’s cellphone market.
How much does it cost to make an iPhone?
Though the iPhone 12 is currently priced at ₹66,000, the total cost of all its components comes to just $373, which is roughly ₹27,500. The iPhone 12 was selling at ₹48,500 the day I got my Mini. Even at this hugely discounted price, Apple was making a 76% profit.
The iPhone 12 Mini costs less to make than the iPhone 12. So if Apple was selling it at the box price (₹70,000, see below) it would have generated even more profits than its bigger sibling. Even at a discounted price of ₹37,500, Apple will still be making a huge profit on the Mini. I know there are other factors in a phone’s cost, but Apple’s profit margins boggle my mind.
Exclusivity and premium pricing go hand in hand
There are many factors that contribute to Apple’s success. Uncompromising quality. Apple makes both the software and the hardware, which translates into a seamless performance. Durable hardware backed by software updates for many years (over five years for my iPhone 6S+). Incredibly efficient production and supply chain system that keeps the cost down at every level.
Apple backs all this up by marketing itself as an exclusive product, as reflected by its design and high pricing. This potent strategy of low costs and high prices is what has made Apple the wealthiest company in the world.
A Gamechanger for Apple
China may have something to do with Apple changing its long-held, price-leader strategy. China contributes a huge chunk of Apple’s revenue. I make it to be around 20% for the first three months of this year based on this article from which I have quoted the relevant section.
On April 28, the Cupertino-based tech giant posted record revenue of $89.6 billion, up 54 percent year-over-year, for the three months ended March 27. International sales drove 67 percent of this revenue, with Greater China in particular pulling its weight, surging 87 percent to $17.7 billion.
However, things are unpredictable in China right now. On one hand, China is threatening to go to war with Taiwan. On the other, the communist party is cracking down on China’s nascent capitalist companies. Chinese tech companies are being taken over by the State, Chinese real estate giants may be going bankrupt, with repercussions that could echo around the world. And power shortages have seen many Chinese industries pull the plug, even on the supply chains of multinationals giants like Apple and Tesla. With all this anti-West rhetoric, there’s also a possibility that Beijing may completely lose the plot and result in Apple’s vast Chinese market disappearing overnight.
Apple needs another huge market to replace the possible massive hole in its bottom line if the Chinese market does indeed vaporize into thin air. The only country that fits the bill is India, with its 1.4 billion population. India may not be as wealthy as China, but is a stable democracy and also has the potential to replace China as a manufacturing center for Apple.
Apple has attempted to get Indians to switch to their expensive phones for years. Indians appreciate the quality of iPhones but they want their money’s worth and Apple’s pitch wasn’t flying. As a result, Apple has been languishing at around 1% market share of mobile phones in India.
However, if China cut ties with the West, China’s loss may turn into India’s gain as a lot of that outsourced production may move from China to India. That will mean the import tax which makes iPhones so pricey will be taken out of the equation. If Apple takes advantage of that cost relief and starts selling affordable yet near state-of-the-art iPhones, then Apple's share of India’s mobile phone market will dramatically shoot up.
A Gamechanger for Indian fans of Apple
I’m a long-time Apple user and own a Mac, a couple of iPads and iPhones, and an iPod, all in varying states of decrepitude. Even the newest among them, the iPad is suffering from screen burnout and will need to be replaced shortly. I started off on iPhones with the iPhone 4, graduated to the iPhone 5, and then switched to the iPhone 6S+ around five years ago. At that point, iPhones were already out of my budget. I only went ahead and got my iPhone 6S+ because it was from Dubai, where it was cheaper by around ₹25,000 ($315). Anyway, Apple didn’t look like it was going to come down on prices. So my plan was to use my iPhone 6S+ for as long as I could, and hope Apple changes its pricing strategy. If they didn’t, I would be forced to switch to Android.
So that’s how I ended up waiting for years for Apple to get off its high horse. But Apple refused to budge, and I ended up using my iPhone 6S+ for 5 years. Apple did make one exception, the original iPhone SE. I got that phone for my wife for ₹17,000 ($225), which was a real bargain. However, its screen was just too tiny for me, but not for my wife who dislikes big phones.
Anyway, my old 6S+ has been going strong despite a recent near-drowning in an overhead tank. Sadly, WhatsApp just announced it will be discontinuing support for the iPhone 6S+ from Nov 2021. That was the death knell for my 6S+, as WhatsApp is India’s default messaging app.
Time had run out for me. I had to decide whether to stay with Apple or switch to Android.
At that point, Apple was still stubbornly holding its price. So if I wanted to stay with Apple, my only option was the iPhone SE2 (with A13 chip) for around ₹40,000 ($540). But Apple’s Touch ID doesn’t work for me in India’s humid conditions.
Yes, there are other older iPhones available in India. I was willing to pay up to ₹37,500 ($500), as long as the iPhone was not more than one generation old. With the iPhone 12 Mini selling for ₹60,000 ($800) in the Apple Store at that point, my long run with Apple seemed destined to end.
Fortunately, Apple slashed its prices, I got the iPhone I wanted, at the price I wanted, and everybody lived happily ever after.
Are affordable iPhones here to stay?
I hope my $500 iPhone 12 Mini starts a trend of Apple launching affordable iPhones with almost state-of-the-art tech in price-sensitive countries like India. Indians are a savvy lot, and won’t fall for branding-led pricing. But they will always recognize quality and won’t mind paying a reasonable price for it. The runaway success of the iPhone 12 sale is all the proof that Apple needs about the potential of the Indian market.
Anyway, the ball is in Apple’s court. Will watch what happens next with interest. On my iPhone 12 Mini, of course.
