Tim Cook needs to be spending a bit more time in India.
Apple's CEO, who's undertaken many high-profile (and probably a few low-profile) trips to China through the years, is struggling to win over the next big smartphone market.
Data released Friday by Strategy Analytics show that sales in India of iOS-enabled smartphones, meaning iPhones, fell 35 percent in the second quarter from a year earlier. What's worse, that decline left the U.S. company with just 2.4 percent of a market that grew 19 percent.
While Apple has experienced decreasing sales and shrinking share in many parts of the world, what's particularly worrying is its inability to capture customers so early in the Indian market's development.
It's true that the second quarter is often a trough for iPhone sales, because it occupies that dead zone between old and new devices in Apple's annual release cycle. Yet such a deep plunge indicates just how little loyalty Cook and his design chief Jony Ive have managed to build for its products. Even in China, where Apple slipped to No. 5 during the same period, the company still managed to garner a 6.7 percent share of a much larger market.
The risk for Apple is not in this quarter's or next quarter's earnings, but in building a habit among Indian consumers to use and rely on Apple's iOS ecosystem. Selling just 800,000 phones in a quarter isn't going to get the market addicted.
Swapping between Android and iOS is notoriously cumbersome, despite attempts by both camps to make it easier. Cook surely realizes that if smartphone users buy into, and enjoy, the Android OS, it will be a mammoth challenge to convince them to swap over to his higher-priced offering.
An obvious workaround is to start selling cheaper devices, but that's a strategy Apple knows is fraught with risks. For one thing, once a price standard is set it becomes ingrained in consumers' minds, making subsequent increases almost impossible. And Cook doesn't want to start selling cheap phones globally. Price is as much part of the iPhone brand as its design and ecosystem, and avoiding price wars has been a point of pride for the company.
While Apple could, in theory, release a cheap phone just for India, stopping exports out of the country would be difficult. It also would be out of sync with the strategy of making devices that are global and universal.
Another way, expensive and by no means assured, would be for Apple itself to subsidize its phones through telecom operators or other outlets that could lock consumers into contracts in return for cheaper upfront pricing. There are many reasons why that might fail, including the fact that most Indian connections are pre-paid.
Apple is renowned for its creative product design. Now it's time to apply that zeal for innovation to its business model.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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