Apple CEO Tim Cook is on a goodwill tour through India, a country he looks at and sees dollar signs.
And no wonder, given the enormous promise in India for a smartphone industry with disappearing growth. Research firm IDC has predicted India will leapfrog the U.S. next year as the second-biggest smartphone market in the world behind China. Cook said last month that the country is where China was seven to 10 years ago -- on the cusp of hypergrowth as India's mobile-phone obsessed consumers start to buy Internet-connected smartphones in droves.
But many barriers stand between Apple and a windfall from India. IPhones are expensive there. The company has run into regulatory roadblocks to sell used iPhones and to open its own retail shops in the country. Right now, Apple's share of smartphone sales in India is around 2 percent.
It's hard to predict what happens, but Apple and its fans point to the company's track record in China -- another country that once looked impossible for Apple to crack but turned into one of the biggest success stories of any foreign company in China. (That is, until recently.) About one-quarter of Apple's total revenue comes from sales in the region including China.
But India has a barrier that Apple didn't have to worry about in its earliest days in China: tough local competition.
Before Apple started selling iPhones in China in 2009, the biggest sellers of smartphones were other foreign companies, Nokia and Motorola. In India, Apple is up against local powers that won't be easy to unseat. Domestic tech companies including Micromax and Intex accounted for 39.3 percent of smartphones sold in the first nine months of 2015, according to analysis of IDC data by John Butler and Matthew Kanterman from Bloomberg Intelligence. Compare that with China in 2009, when Nokia and Motorola controlled 85.7 percent of relatively small smartphone sales.
Circumstances can change quickly, of course, particularly in nascent markets. For example, once Android smartphones became prevalent in India a few years ago, Nokia lost its dominant market share within a year or so. And South Korea's Samsung has become the top seller of smartphones in India, which shows there is room for nondomestic phone powers there.
But the government in India has shown it's willing to support local industry through regulation. And phone shoppers might be inclined to buy locally, too, if given the choice between a well-known domestic brand like Micromax and an expensive foreign bauble from Apple.
Even the non-Indian companies are trying to stress local ties. Samsung and Chinese phone makers such as Lenovo and Xiaomi have made moves to make their phones in India to comply with the government's "Make in India" campaign. IDC said on Tuesday that more than two-thirds of all smartphones sold in India in the first quarter were assembled within the country.
That's not to say Apple won't be able to overcome all these obstacles. One reason Cook is in India is to unveil a program for app developers, Bloomberg News reported. Apple's moves in China to create a community of software coders to create iPhone apps were a big reason Apple was a hit in that country despite a similar list of handicaps it faces in India.
Apple is smart to borrow from its China playbook in India. But it won't be easy to beat the home teams.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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