Much of the attention surrounding Apple's (NASDAQ:AAPL) iPhone is focused on the company's two most important markets: the U.S. and China. And rightly so -- Apple brings in the most revenue from its U.S. sales, while China is the company's largest smartphone market.
But mobile device makers are focusing their attention on India's fast-growing mobile market as well. And if new information about Apple proves true, the iPhone maker is in the midst of establishing a bigger retail presence there as India moves toward becoming the second-largest smartphone market in the world.
What Apple's doing
According to information from NDTV Gadgets, Apple has selected about 100 new reseller retail locations in India, with the goal of adding 500.
The stores aren't owned by Apple, but they will sell the company's mobile devices -- part of a larger Authorized Mobility Resellers (AMR) program Apple has set up in the country. So far, 12 cities have reportedly been selected for the AMR program, and individual resellers are still being selected based on their past Apple product sales numbers.
Why expand further into India?
It's no secret that India is quickly becoming a major market for smartphone makers, and Apple is likely trying to position itself to benefit from the country's trends.
According to Strategy Analytics, India will become the second largest smartphone market in the world in the next two years. China will continue leading the way, while the U.S. will be pushed down to the No. 3 spot.
Earlier this month, Strategy Analytics' Linda Sui said that China's smartphone growth is slowing a bit and India is "fast becoming the next major growth wave." That growth is fueled by the country's low smartphone penetration and a burgeoning middle class. According to research by McKinsey, India's middle class will expand from about 50 million people right now to 583 million by 2025, which will encompass 41% of the population.
Apple's big hurdle
With its new reseller locations, Apple will be poised to capitalize on India's projected smartphone growth. But there's one thing the company has to look out for: local vendors and low selling prices.
Indian device makers, particularly Micromax, are producing smartphones with good specifications for much lower prices than Apple. The NDTV Gadgets article notes that Apple may allow the reseller stores to sell devices below the official retail prices. We'll have to wait and see if Apple actually goes through with that, or how deep the discounts are.
Just as it did in China, Apple will have to balance its premium brand persona with the fact that many smartphone users won't be able to afford an iPhone for a while. The average selling price of an iPhone is $660, while Micromax sells phones ranging from $50 to $300. And other non-Indian device makers, like China-based Xiaomi, sell devices in the country for about $100.
Even if these 500 resellers pan out, it'll likely take a while (think a few years, rather than months) for Apple to be a major smartphone player in India. Right now, the company has just 2% market share in the country.
Apple is playing the long game in India, just as it has in China. The company faced some of the same hurdles in China that it will confront in India, yet China has become Apple's most important smartphone market, and is quickly becoming one of its largest revenue markets as well. If things play out similarly in India, Apple's small moves right now could pay off in big ways in a few years.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.