5 things Apple's Tim Cook needs to do on his trip to India

5 things Apple's Tim Cook needs to do on his trip to India

Tim Cook is on his first visit to the country, a potentially high-growth market

Apple CEO Tim Cook is on his first visit to India, a market where the company's revenue has grown but whose market share is still small because of price-sensitive consumers. The trip is important as Apple looks for markets where it can  expand. In April, the company reported its first quarterly revenue decline in 13 years as iPhone sales dropped year over year. Meanwhile, India is the world's third-biggest smartphone market, after China and the U.S. Here are five things Cook will be aiming for in India. 

Get concessions from Prime Minister Narendra Modi's government

Apple has applied to the Indian government for permission to import refurbished iPhones so that it can offer lower-priced phones to the Indian user. The company's phones are considered too expensive by India's price-sensitive users, even though the iPhone is a well-regarded brand and a status symbol in the country.

As a result, the company does not figure in the list, released this week by IDC, of the top five smartphone vendors in the country in the first quarter. Rival Samsung Electronics, which has a range of phones at various price points, tops the list.

The company claims its refurbished phones are not like any other second-hand phones that are traded in India, but will be Apple-certified, pre-owned phones that will have new serial and IMEI numbers, and will ship from Apple’s suppliers. The move to import used phones will not likely go down well with India's Prime Minister Narendra Modi and other government officials, who have been pushing handset makers to manufacture new devices in India.

The Apple application was rejected earlier because of concerns about the e-waste that the refurbished phones, which would be closer to end of life than new devices, could generate.

The government is instead likely to try to persuade Cook to manufacture Apple products locally. More than two-thirds of the smartphones shipped in the first quarter were assembled within the country, with over 25 vendors making phones locally, according to IDC.

Secure permission for wholly owned Apple stores

Cook will also be asking the government for clearance for company-owned retail stores. Local rules require that foreign companies that sell through "single-brand" stores must have at least 30 percent local content in their products, though the government has indicated it may consider waivers. Apple has asked to be excused on the ground that its products are high-technology and cannot have local content, according to sources close to the situation.

The company currently operates through third-party owned, exclusive stores run by partners like Imagine, in addition to selling through retail chains and online e-commerce websites. But Apple is proud of the design and layout of its stores, which it considers as a critical component of its branding and retail experience.

Cook is expected to meet Prime Minister Modi and other government officials during this trip. But there have been unconfirmed reports that the government has already decided again against allowing refurbished phones, although the retail stores may be permitted.

Help increase smartphone penetration in India

Growth in China is slowing, with research firm Canalys reporting that smartphone shipments grew by only 2 percent year-on-year in the first quarter. For many smartphone vendors, India has emerged as the next big opportunity because of the large number of people who do not have smartphones.

The Indian smartphone market will never grow to the size of China's because of the population's low average per-capita income, high taxes and the appreciation of the U.S. dollar against the Indian rupee, Kiranjeet Kaur, research manager at IDC Asia-Pacific, said in an interview recently. 

In the first quarter of this year, 105 million smartphones were shipped in China, according to Canalys. Smartphone shipments to India, in contrast, grew 12 percent year-on-year to 24.4 million, the firm said.

However, smartphone penetration is at less than 30 percent in India, which makes it one of the most attractive markets in the world, according to IDC. But those who haven't bought smartphones yet are more likely to be looking for low-cost devices produced by lesser-known Indian brands. Many of them will be first time users who found phones and the service providers' tariffs so far unaffordable, or feature phone users hoping to migrate to smartphones.

Apple had a 56 percent year-on-year growth in iPhone sales in the last quarter in India, but most of the growth for Apple has come from sales of older models. The growth has also come from a small base.

Woo developers to create localized apps on iOS and OS X

During his visit to India, Tim Cook is also likely to reach out to developers to create localized content and applications around the iOS operating system. In Beijing, Cook similarly met with top app developers at an Apple store.

Apple announced on Wednesday an iOS "Design and Development Accelerator" to assist the "tens of thousands" of developers of apps for iOS in India. The new facility in Bangalore, which will be open early next year, will give developers access to tools for app creation.

Creating applications with locally relevant content and in local languages has been a concern for many technology companies, with Google and Microsoft the most visible companies in this connection.

Coax operators to speed up LTE rollouts

Apple is placing great hopes in India on the rollout of LTE networks. "The things that have held not only us back perhaps but some others as well is that the LTE rollout with India just really began this year, and so we'll begin to see some really good networks coming on in India," Cook said during an earnings call in April.

A number of operators in India are working on their LTE networks. Also, unlike in the U.S. and some other markets where the majority of phones are sold through carriers, in India carriers focus on services rather than offering phones, thus putting demands on Apple to quickly roll out its distribution channels to markets outside the main cities.  During his visit, Cook may try to strike bundling deals with top operator Bharti Airtel and upstart provider Reliance Jio.  

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