Try as it might, technology giant Apple (AAPL +0.11%) remains frustratingly wedded to the continued success of the iPhone. Although there are certainly worse problems for a company to have, as the iPhone goes, so goes Apple.
This strategy has worked to a remarkable degree in the past year, but concerns understandably remain that economic headwinds in key geographies -- (cough: China) -- could derail the growth of the product that produced a whopping 62% of Apple's $51.5 billion in sales per its recent earnings report. This risk certainly isn't lost on Apple management, and the company is continuing to expand the iPhone's reach around the world, a strategy further exemplified by a recent move on Apple's part.
Apple goes to Vietnam
Per reporting from Reuters, Apple recently established a subsidiary in Vietnam to help further its expansion into the fast-growing Vietnamese smartphone market. According to the official business registration documents, Apple's new subsidiary is based in Ho Chi Minh City, and was officially capitalized with initial funding of only $672,194, which entertainingly translates to 15 billion Vietnamese Dong at the current astronomical exchange rate.
One interesting issue that the filing or subsequent reporting doesn't necessarily discuss is whether this sets the stage for Apple to open its own branded retail stores in Vietnam. Apple has long leveraged its much-copied retail experience to help build its brand, and increase product familiarity in geographies with little exposure to the company. It also isn't immediately clear whether Vietnam enjoys a robust enough consumer class to support an Apple store.
True, Apple saw iPhone sales triple in Vietnam in the first half of its fiscal year 2015, albeit likely from a low base. However, with a population of only about 90 million residents, and per capita incomes of $5,350 at purchasing-power parity (PPP), Vietnam seems more likely to prove a complementary potential growth driver for iPhones sales versus a core future financial engine.
Playing the long game
This storyline also more broadly alludes to Apple's ongoing international push, and its attempts to move into additional long-term smartphone growth markets other than China.
Apple Store Shanghai. Source : Apple.
At present, little data exists to support this strategic imperative for Apple. Although many worry about the other shoe dropping, Apple's sales in China continue to impress. Although they declined 5% sequentially, China revenue increased by an eye-popping 99% year over year in Apple's recently reported fourth quarter, which is likely why Apple plans to open 25 new stores in China through 2016. However, as Chinese economic data continues to trend downward, Apple's efforts to expand and diversify its reporting regions to Vietnam and elsewhere is only savvy business on the Mac maker's part.
Beyond Vietnam, Apple is slowly laying a foundation in other frontier markets like Indonesia and India that offer huge potential payoffs in the decades to come. For example, Apple recently signed a deal with Tata-owned Croma stores to help open its first branded Apple retail stores in India in what easily figures to become one of the most important smartphone markets in the world over the long term. Apple has laid a similar foundation in Indonesia by slowly hiring staff, opening an office, and enabling the iTunes Store to accept the local currency -- the rupiah.
In total, these combined efforts are likely to yield little immediate financial impact. However, given Apple's increasing size, exposing itself to as many growth drivers as possible, especially for the all-important iPhone, could help buoy Apple's finances before other more sizable growth drivers, like Apple's Project Titan, come on line.
