Why Apple's IPhone Success in BRIC Countries Is a Big Deal

Apple's iPhone was a smash hit in the BRIC countries last quarter, setting sales records in the emerging markets of Brazil, Russia, India and China, CEO Tim Cook said on the earnings call today.

The chart above should give you a sense of why that matters. The BRICs are devouring the smartphone market. Those four countries now account for more sales than all other emerging markets combined. And it's the same case for all developed ones, too.

"Everything that happens in the wealthiest countries happens in all other countries; you can set your watch by it," Horace Dediu, who closely follows Apple at his Helsinki-based consulting firm Asymco, said in an interview. "All the technologies propagate predictably to all people on the planet. It’s inevitable."

The rise of the BRICs happened toward the end of 2012 as Android was solidifying its dominance globally. At the time, it seemed to be a troubling sign for Apple. Today, Cook was eager to play up that Apple was eating into Android’s market share. He said on the call that about three-fifths of people who bought the entry-level iPhone models, the 4s and 5c, had switched from phones running Google’s operating system.

And Cook kept returning to the BRICs and other emerging economies. IPhone sales in Brazil, which got its first Apple Store this year, were up 61 percent during the first half of the company's fiscal year compared with the same period last year, Cook said. Russia grew 97 percent, and India 55 percent, he said. Apple set a quarterly revenue record for Greater China at $9.8 billion — thanks in no small part to a 28 percent jump in iPhone sales, with the addition of China Mobile, the largest phone company in the world.

Photographer: Daniel J. Groshong/Bloomberg

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Photographer: Daniel J. Groshong/Bloomberg

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"I am particularly proud of the results in these markets because these have not been historic strong points for Apple,” Cook said. "We've been working at China for a while and have learned a lot, and I'm very proud of what we've done there. But I think some of these other numbers I just read demonstrates that we're beginning to have really nice success outside of there as well.”

Despite all the anticipation for the plastic iPhone 5c to open up a new budget market for Apple, Cook has a three-year-old phone to thank for the success in BRIC countries. Consumers in emerging economies have been snapping up the iPhone 4s, which dropped in price after the 5s and 5c came out, Cook said. The 5c barely got a passing mention in today’s earnings call.

This jibes with what Mobile TeleSystems, the largest mobile carrier in Russia, has been seeing there. In an interview, Alexey Kornya, the telecom’s chief financial officer, said subscribers have not been clamoring for the 5c because "it’s not very differentiated.” That may not matter much to Apple as long as less-wealthy consumers are buying older models of the iPhone.

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