With Apple turning its eyes toward capturing the Indian market, the company has plans to launch a budget version of its iPhone specifically targeted to emerging economies like India. And Pegatron, a Taiwan-based company, stands to profit significantly if Apple’s plans become successful.
New orders for the budget iPhone
The new budget phone is expected to be US$300 cheaper than existing iPhones and is said to feature an LCD screen instead of the OLED screen found in iPhone X. The vast majority of manufacturing orders for these phones are expected to go to Pegatron since the company specializes in the production of LCD screens.
Once the order for manufacturing comes through, Pegatron should see a big boost to its bottom line and will also be in a position to strongly compete with its dominant rival Foxconn Technology. According to estimates, Pegatron will receive nearly 60 percent of the orders for the new budget phone from Apple.
Although Pegatron might face stiff competition from another rival company, Wistron, for the orders, experts believe that the latter will lose out because Wistron has been suspected of using unauthorized components during their previous manufacturing contracts with Apple.
However, the success of Pegatron will largely depend on how well Apple’s new budget phones do in India, one of the toughest markets that Apple has encountered since the launch of their iconic smartphone.
iPhone and the Indian market
India has been a major international market where the iPhone has not been able to make any significant inroads. And for the past couple of years, Apple has been busy making long-term strategies to increase their market share in the country.
“I feel like we’re making good progress there and are gaining an understanding of the market, but we still have a long way to go, which I sort of see as an opportunity instead of a problem. And I do feel great about the growth rate,” CEO of Apple Tim Cook is quoted by CNBC during last year’s fourth quarter earnings call.
But despite Cook’s positive outlook on India, the fact of the matter is that iPhone sales figures dipped in the country as of the second quarter in 2018. While during the first quarter, Apple held a 2 percent share of the Indian smartphone market, it has dropped by half to about 1 percent during the second quarter this year.
“Apple had a slow quarter as it underwent changes in its distribution strategy. Apart from this, its domestic assembling is yet to pick up pace, which means the Cupertino giant is still relying on imports for its sales in India. Apple had 1 percent market share during the quarter, its lowest in recent history,” according to 9to5Mac.
Several reasons have been cited for iPhone’s continuous underperformance in India. The high price is said to be the first dampener in the price-sensitive Asian giant. But a surprising fact is that even the demographic that has the money to buy iPhones seems to have less of an interest in them.
This likely stems from the fact that India mostly is a value-oriented society where the value of a product determines its sales rather than just the status of the brand. And with companies like Samsung and OnePlus offering smartphones with features similar to the iPhone at a far cheaper price, the value-oriented Indian consumer tends to gravitate toward these offerings.
As such, Apple’s move to manufacture budget iPhones targeting markets like India could turn out to be a smart one. However, Apple has to ensure that they match the features offered by similarly-priced competitor phones.
If the budget iPhone sacrifices too many features in exchange for the lower price tag, the Indian consumer is again likely to neglect it. And given that India is a 1.3 billion-sized market that is projected to be a fast-growing economy for the coming decades, Apple better have a good strategy to capture a decent market share.