Please ensure Javascript is enabled for purposes of website accessibility

Has Apple Shot Itself in the Foot in This Crucial Smartphone Market?

By Harsh Chauhan – May 5, 2020 at 9:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The smartphone giant's gains in India last quarter may soon be wiped out.

The global smartphone market has taken a beating over the past couple of months. The novel coronavirus outbreak has forced people into their homes and brought most economic activity to a halt. Counterpoint Research estimates that global smartphone sales fell 14% year-over-year in February 2020, driven by a massive contraction in China.

The research firm points out that sales of smartphones in China fell 22% annually in the first quarter of the year as COVID-19 gripped the country. Moreover, smartphone sales forecasts for the full year appear to be grim, as IDC expects shipments to fall by 2.3%. Amid these gloomy smartphone numbers, the Indian market did well, and Apple (AAPL -0.24%) benefitted handsomely over there in Q1. The bad news: Apple's India momentum could snap soon.

Three Indian women stand in a row, all holding up smartphones

Image source: Getty Images.

India smartphone sales hold steady despite the coronavirus

According to Counterpoint Research, smartphone shipments in India grew 4% year-over-year to 31 million units during the first quarter of 2020. The first two months of the year witnessed impressive shipment growth on the back of new devices and aggressive promotional activity before COVID-19-related shutdowns caused a 19% slide in March.

The Indian government imposed a nationwide lockdown on March 24 to contain the spread of COVID-19, bringing all economic activity to a halt. Sales of non-essential items such as smartphones were stopped as shops were shut and e-commerce operators were only allowed to deliver essential goods. As the lockdown continues through April -- it has now been extended until May 17 -- India's smartphone market is likely to lose more steam.

But if we look beyond the near-term disruptions caused by the pandemic, India's smartphone market did well in the first quarter of the year compared to the global numbers. Apple was one of the key beneficiaries of India's smartphone growth in the first quarter, clocking an impressive annual jump of 78% in shipments, according to Counterpoint's estimates.

What's more, the company dominated the premium smartphone space in India (devices priced at 45,000 Indian rupees, or roughly $600) with a 55% market share. However, the surge Apple enjoyed in India last quarter may not last for long.

Apple's latest surge in India isn't sustainable

The Indian smartphone space is bound to take a hit in the coming months thanks to the lockdown, which is one of the biggest reasons why Apple's sales could fall off a cliff over there. Millions of jobs are reportedly on the line in India as the government keeps the economy nearly shut to contain the spread.

For instance, the Indian textile industry is staring at job losses of nearly 10 million if there is no government intervention. The auto industry is already mired in deep uncertainty as sales have plunged. So spending on discretionary items like expensive iPhones may be the last thing on consumers' minds in India.

Moreover, Apple seems to have made a few bad choices as far as its iPhone line-up is concerned. First, it priced the all-new iPhone SE at a hefty premium instead of the $399 international price and discontinued the iPhone 8 in the Indian market.

What's worth noting is that the iPhone 8 was being sold for around 39,000 rupees (roughly $520) before it went off of the market. The new iPhone SE has been launched at around $560 in India, which doesn't make much sense considering the newly launched device is essentially an updated iPhone 8 at heart.

So Apple has raised the entry barrier for Indian consumers looking to get into the iPhone ecosystem, which may not have been the right thing to do in the current scenario.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Stock Quote
$145.75 (-0.24%) $0.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.