Apple Turns to India

Apple Is Expected to Sell Refurbished Phones in India

Apple has been looking to increase its share in the Indian smartphone market, where sales volumes are still expanding as growth in China and the US has flattened. CCS Insight’s recently updated forecast expects India to consume 135 million smartphones this year — the third-largest market behind China and the US.

However, as Indian consumers are very price-conscious, India is dominated by Android devices, and Apple’s share of the Indian smartphone market is very low. More than 100 million smartphones were shipped in India during 2015, helping push the number in use over 250 million. In many ways it’s a wild market still finding its footing — we project total smartphones in use to treble by 2020. There are more than 150 brands of smartphones available in India, some successful domestic brands like Micromax, Intex and Lava, top global names such as Samsung and Lenovo, and some in-between.

India won’t be a panacea for Apple. It certainly can’t fill growth gaps in other major markets, but India is certainly big enough to make a noticeable difference. And many elements are now falling into place for Apple. Coverage of 4G networks is sparse, but is expanding and Indian consumers appear to be eager to jump to faster Internet speeds. And last year, Apple invested in distribution channels in more Indian cities and has recently applied for government permission to open retail stores in the country.

Although there’s a great deal of wealth in the country, the market for high-end phones could remain a niche segment for years to come. As a way to address these market realities, Apple has now embarked on a plan to sell refurbished phones in India.

In previous years, Apple has relied on the sale of older models, for example the iPhone 4S, to reach the Indian middle class, a role now taken by its new iPhone SE. By offering certified pre-owned phones, Apple is now planning to reach deeper into the market. Apple has recently applied a second time to the Indian government to ship refurbished phones into the country; its first application was rejected by the Ministry of Environment owing to concerns about e-waste.

A year ago we wrote about the agreement between Apple and Foxconn in which Foxconn will refurbish second-hand iPhones collected through Apple’s instalment plan in the US (see Foxconn’s Second-Hand Business). CCS Insight predicts global sales of second-hand phones to grow by 15 percent compound annual growth rate over the next four years, and a lot of these sales will be in emerging markets.

Apple could have a strong impact on mid-tier price bands in India and could even reach lower segments of the market with devices several generations back, such as the iPhone 4S. If Apple could hit prices around 10,000 rupees ($150), it would be entering one of the broadest smartphone price bands in the country. Last month, when Apple unveiled the iPhone SE with a starting cost of $399, many observers assumed it was a device particularly well suited to India. However, this price tag is still out of reach for the mainstream Indian consumer, and Apple needs to create large-scale demand to encourage local developers to create popular apps.

Selling refurbished phones at discount prices must be done with care as Apple cannot afford to dilute what has become the world’s most valuable brand. If positioned carefully, certified refurbished devices could be the right way to help convert cost-conscious buyers to Apple’s camp. The opportunity is further underlined by the fact local phone-makers have banded together to oppose Apple’s entry to the market, fearing an erosion of their market share. However, the Indian government is currently mulling whether to allow the resale of the phones, and the outcome will be a key factor in Apple’s strategy. The sheer scale of the Indian market undoubtedly holds great allure.