Apple Of The “i”(Phone)
In the 100-meters sprint in Olympics, only three make it to the podium. But who remembers the ones in the second and the third spot? Almost none!
Likewise, in the race to the top smartphones, most research agencies share the data of shipments and market shares of the top 5 brands. Rest of the brands including #Apple feature in “Others”. Ask most people associated with the industry, they will know the top 5. Who is the sixth? Well, they will take some time to think and answer. Or they won’t.
Can Apple maintain the momentum they picked up in 2021?
Well, all things considered, I see 2022 as yet another good year for them based on where they are today, the momentum they have gained and the growth drivers.
What has made the difference in terms of iPhone shipments in 2021 doubling over 2020? Well, I have tried to list down the reasons and what to expect from Apple in 2022 as far as the iPhone is concerned.
The growth drivers:
1. Obviously the first one is the aspirational value of the brand. Who doesn’t want to carry an iPhone and flash the logo and make heads turn with its signature ringtone?
2. Their eco-system advantage with the iPad, iWatch and Mac. If you own one of these you would prefer to have the other two due to platform stickiness and completing the Apple ecosystem that enables you to sync all your devices seamlessly.
3. The demand for their older generation models which reach out to a newer customer base with aggressive offers. How many of the top 5 brands can still manufacture and sell models launched by them 3 years back? Hardly any. Also, related is the buy-back price of the older version on iPhone which makes the net price of the new one seem within reach.
4. Their focus on customer experience rather than push hardware specifications. For Apple, it’s never been about RAM/ROM, megapixels, number of cameras. It’s about how an optimal piece of hardware can be fine-tuned to an extent that it delivers a beyond optimal performance. Also, talking from the legacy POV, they’ve always seeded in their customers’ head, “If you don’t have an iPhone, well, you don’t have an iPhone!”. It has always been about putting forth the “brand-first” imagery that makes you feel left-out amongst your peers if you don’t own an iPhone. It’s the “crave” factor, if I must say.
5. The EMI option which makes the entry cost low for a customer aspiring for an iPhone.
6. In an industry where brand loyalties run low, customers switch brands. Not so much in the case of Apple. An Apple customer, in most cases, will remain an Apple customer while more and more Android customers switch to iOS. With a Smartphone base of 550 million of which 500 million are Android users, they have a large pool to tap.
7. Sales from their own online store launched in 2020.
8. Increasing sales by their premium resellers.
9. Make in India which has helped them reduce prices specially of the older generation. More than 70% of their phones sold in India in 2021 were assembled in India.
10. Keeping the aspirational aspect in mind going beyond the metros and the Tier 1 cities in terms of availability.
What to expect in 2022?
#TimCook has made a clear statement that while the sales have shown a good increase over the previous year, their expectations from the Indian market, considering its potential, are high. The premium segment market is also expected to grow further. Expect Apple to:
1. Increase its local production for better availability. As of December 2021, they were manufacturing 70% of the iPhones being sold in India in India, which effectively means practically all models except the iPhone 13.
2. Increase in flagship stores and premium reseller outlets as well as opening-up of the first Apple Store.
3. More aggressive advertising.
4. Take advantage of the expected growth in the premium segment with the ASP moving up and the top 5 brands trying to take position in the premium segment.
5. Launch of a lower end version at Rs 43,900 - The SE 2022 edition with 5G support. With the cheapest iPhone now starting at around Rs. 40k, and a 5G phone at Rs. 44k, a customer looking at the premium segment should prefer an iPhone to an Android phone for its sheer aspirational value. Not to forget is the fact that there is a market of less than 5” screen phones which the SE addresses.
6. Addition of the third manufacturer Pegatron adding close to a million phones in terms of supplies.
Are we looking at Apple touching 6 million+ devices in 2022 then? Possibly yes! It could go much higher if they are able to close the gap between the prices abroad and in India.
Are we looking at Apple retaining its No. 6 position in 2022 despite the growth drivers and strategy? Possibly not because of the #Jio Phone Next.
Will Apple’s growth rate be higher than the industry growth rate? Probably yes!
What could go wrong?
1. With international borders opening-up, people could start buying iPhones abroad affecting sales in India. As per studies close to 10-15% of the iPhone users in India are using devices bought by them or their friends and relatives from other countries. The international warranty that Apple offers just makes the purchase of an iPhone abroad a lot more feasible.
2. Revenge buying could be replaced by revenge traveling, affecting sales of expensive products.
3. A fourth COVID-19 wave.
Whichever way it goes, any brand now trying to enter the Rs. 40k + price segment will have to look Apple in the “i”.