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Making Sense of Apple's First India Revenue Disclosure

By Evan Niu, CFA - Updated Apr 16, 2019 at 5:14PM

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India represented just 0.7% of the tech titan's business in 2018.

Check out the latest Apple earnings call transcript.

Despite talking up its potential in India for years, Apple (AAPL -1.78%) has never made granular disclosures about its financial performance in the country. On occasion, management might note growth rates in iPhone unit sales, but without any additional context of what base they're growing off of. CEO Tim Cook sat down with CNBC's Jim Cramer for an interview this week, and for the first time ever officially disclosed Apple's revenue in India: $2 billion in 2018.

Here's how to make sense of that new data point.

iPhone XS and XS Max

Flagship iPhones are simply too expensive for the average Indian consumer. Image source: Apple.

India is a minuscule part of the overall business

Investors can get glimpses of Apple's India business. For example, The Economic Times reported in October that Apple's India revenue in fiscal 2018 jumped 12% to just under 131 billion rupees ($1.9 billion), citing regulatory filings. Apple's fiscal 2018 ended at the end of September, and Cook's disclosure refers to the calendar year. However, even when acknowledging the timing difference, Cook seemingly contradicted that growth rate, saying India revenue was flat last year.

Curiously, Apple includes India in its Europe geographical segment instead of "Rest of Asia Pacific." Europe represented $62.4 billion in revenue in fiscal 2018; India was just 3% of that. Zooming out a bit, Apple expects total revenue in the December quarter to be approximately $84 billion, which would bring full-year 2018 revenue to around $261 billion. That means India represented a mere 0.7% of the overall business last year.

Apple is reportedly moving some iPhone production to India, which seems more intended to mitigate risk around President Trump's trade war with China as opposed to skirting import duties in India. iPhones are simply too expensive for most Indian consumers. While smartphone average selling prices in India are rising, Nielsen estimates that consumers paid approximately 10,000 rupees on average in 2017, or $140. It didn't help that Apple had to raise prices across numerous product lines even further throughout 2018 to cope with the strengthening U.S. dollar. The Indian government also hiked import tariffs on mobile phones last year.

In no uncertain terms, Apple has struggled tremendously in trying to expand in India, which is now the third-largest smartphone market in the world.

Still optimistic

Cook continues to express optimism around India. "We've had really great productive discussions with the Indian government and I fully expect that, at some point they will agree to allow us to bring our stores into the country," Cook said on the last earnings call. "We've been in discussions with them and the discussions are going quite well."

The chief executive also added, "I am a big believer in India, I'm very bullish on the country and the people and our ability to do well there."

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