In India, Apple is actually willing to play the “cheap” card to sell iPhones

By Nandagopal J. Nair

Apple has been straying from Jobs' vision in India. Reuters/Sivaram V

Apple made it clear yesterday that it isn’t interested in the low end of the smartphone market. But in India, where the company trails its rivals badly, Apple has in fact been willing to sacrifice margins to boost sales.

The key to understanding Apple’s pricing strategy in India is the rupee, which has declined sharply this year. Most multinational corporations have responded by raising prices on everything from TVs to laptops. Smartphones, too: Market leader Samsung hiked prices by 5% last month.

But not Apple. It is using the falling rupee as a lever to boost its paltry 4% market share. Redington, one of the two distributors for Apple in India, told Bloomberg that Apple is selling its smartphones and tablets this year at the same prices it did in 2012. That’s despite the rupee’s 15% decline against the US dollar since the beginning of 2013.

After years of neglecting India, Apple has adopted a strategy there that’s more like a hungry upstart than global giant. It was the first smartphone maker to introduce buyback schemes in India, a move since copied by competitors like Samsung, BlackBerry, and Sony. It also rolled out a staggered payment scheme earlier in the year. The response has been overwhelming, and Apple’s sales in India surged 400% in the April-to-June quarter, albeit from a low base.

If Apple demonstrates the same pragmatic approach with the iPhone 5C, it could challenge Samsung’s dominance in the high end of India’s smartphone market. At current exchange rates, the iPhone 5C could be priced around 35,000 rupees ($553), according to consultancy IDC, which would be 16% cheaper than Samsung’s premium offering, the Galaxy S4.

Even at that price, Apple will not be able to compete with local players like Micromax and Karbonn Mobiles, which sell good smartphones for as little as 19,000 rupees. But that shouldn’t bother Apple. With India predicted to replace the United States as the world’s second largest smartphone market by 2017, there will be plenty of room for Apple to grow at the higher end of the market.