When you're already the largest company in the world, where do you go from there?
Such is the literal and figurative embarrassment of riches facing tech giant Apple (NASDAQ:AAPL) and its shareholders. The downside of being so successful is that it makes further expanding its business increasingly difficult.
In keeping with its leviathan status, Apple has understandably chosen to pursue opportunities of increased scale, both in terms of its current business and its targeting of future potential markets. However, continuing to grow its iPhone installed base certainly won't be a walk in the park, as one recent story about its experiences in India further demonstrates.
News of mounting opposition
According to recent reporting from Bloomberg , the company with the largest market cap in the world appears increasingly intent on deepening its presence in the world's second-most populous nation, but is facing mounting opposition there. Per the article, a consortium of Indian electronics manufacturers recently established a lobbying arm, the Mobile and Communications Council, with the goal of swaying public and government opinion against Apple's maneuvers to more meaningfully enter the country.
The electronics industry opposition appears intent on framing the argument in a way that casts Apple's efforts as running directly counter to the goals of Prime Minister Narendra Modi's Make In India campaign, which is promoting domestic manufacturing growth. In doing so, the anti-Apple campaign has employed some fairly acrimonious rhetoric. According to Sudhir Hasija, the chairman of local telecom Karbonn Mobiles, "Make in India could turn into Dump in India... Even if the refurbished iPhones are priced a bit more than 10,000 rupees [~$150], that will hurt our sales because Indians may choose Apple for its snob value."
This level of vehemence from domestic smartphone makers shouldn't be particularly surprising. The Indian smartphone market remains relatively fragmented, with only South Korean smartphone giant Samsung and domestic supplier Micromax controlling market shares of more than 10%. Apple only accounted for about 2% of the Indian smartphone market according to Counterpoint Research, a situation it actively hopes to change in coming months.
Today, Apple is legally allowed to sell its products in India only via distribution partnerships with domestic third-party retailers or as store-within-a-store concepts inside larger retailers. That's likely to change. Apple has reportedly reapplied with the Indian government to gain full legal access to import its products into the country, a move that could open the floodgate for Apple's presence in the world's largest democracy. Apple is reportedly likely to receive import approval from the Indian government, though when that might happen remains unclear.
The initial data suggests Apple could enjoy considerable upside in India. On its first-quarter fiscal 2016 conference call, Apple CFO Luca Maestri noted that Apple sales in India grew an impressive 76% year-over-year. Though its footprint in China is far larger than its footprint in India, Apple's sales in China increased only 14% during the same period . Apple's recent product moves appear aimed at positioning the firm to compete in emerging markets like India, where lower-priced smartphones are the norm.
At its spring product launch event last month, Apple debuted its smaller 4-inch iPhone SE, whose introductory price of $399 is well below the $649 base price of the iPhone 6s. Additionally, Apple's shift toward installment plans, which include annual handset upgrades, also looks likely to create a glut of used iPhones that Apple could resell in markets like India, where the majority of the smartphones sell for less than $150.
India has already eclipsed America to become the world's second-largest smartphone market , and that market will likely enjoy years of continued expansion. So as Apple growth in China appears likely to moderate, Apple's India plans simply seem like good business.
Andrew Tonner owns shares of Apple. The Motley Fool owns shares of and recommends 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.
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