Motley Fool: Conditions are ripe for Apple in India

From Harsh Chauhan's "1 Emerging Catalyst That Apple Investors May Have Missed" posted Wednesday:

CEO Tim Cook said on the latest earnings conference call that Apple witnessed "very strong double-digit growth in Brazil, Indonesia, and Vietnam." He also added that the company's revenue in India nearly doubled. That's something investors should take note of, as the Indian market presents a solid long-term growth opportunity for Apple. Here's why.

Canalys reports that smartphone shipments in India hit 36.4 million units in the second quarter of 2022, an increase of 12% over the prior-year period. That means Apple grew at a much faster pace in the Indian market last quarter.

Though the company didn't clarify its revenue from the Indian market, estimates suggest that Apple's revenue from its Indian operations was close to $3 billion in fiscal 2021. The tech giant's Indian revenue reportedly increased 68% last fiscal year. In fiscal 2022 analysts expect Apple's top line to increase another 31% in the Indian market, which would bring its revenue over there close to $4 billion.

While that looks like a small amount compared to Apple's projected revenue of $392 billion in fiscal 2022, the company's impressive growth in India at a time of high inflation means that consumers are willing to spend on iPhones. More specifically, the average selling price (ASP) of a smartphone in India stood at $211 in the first quarter of the calendar year.

Apple's entry-level iPhone SE is priced at 43,900 Indian rupees in that market, which translates into roughly $553 at the current exchange rate. So Apple seems to be enjoying solid pricing power in India... So the conditions are ripe for Apple to step on the gas in the Indian market, and the company is pulling the right strings to ensure that it doesn't miss out on the lucrative long-term opportunity present over there.

My take: The subcontinent is Apple's last big, game-changing phone market. BTW, the Motley Fool has gone nuts for Apple lately. Who decides when to do that, I wonder?

16 Comments

  1. Fred Stein said:
    Love the detail. Thanks. I had commented here earlier that Apple’s potential in India is under appreciated. Getting numbers helps. Vietnam, also mentioned on the call, has 96 million people as of 2019 census.

    H. Chauhan mentions inflation. Apple’s price increases are way below the inflation rate.

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    August 10, 2022
  2. Hap Allen said:
    Tim’s comment about revenue in India was what stuck out for me in the earnings call. Looking forward to more, not to mention more production there, assuming the necessary standards can be sustained.

    3
    August 10, 2022
  3. Steven Philips said:
    Motley Fool is issuing one of their “rare” Double Secret Whammy buys on Apple?

    1
    August 10, 2022
  4. If Foxconn, Wistron, and Pegatron start hiring & training new employees near the numbers they do in China, Indian consumers and the government will definitely warm to Apple products & services. However everything takes longer to roll out in the world’s largest democracy.
    Share price near $169 sure looks fine! Who’s underwater now?

    3
    August 10, 2022
  5. Alan Trerise said:
    To make it into the top 10% of income in India only requires $3800/yr. Affordability is the real issue.

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    August 10, 2022
    • Fred Stein said:
      Yes affordability is key for Apple. Growth appears strong, according to report by Association for Asian Studies (link to follow). As of 2015, 47 million households had disposable income of over $10K USD, doubling about every 6 years. We can assume a TAM of over 100 million and growing for Apple.

      Just guessing, gifting may be a factor, conferring status on the giver and the receiver.

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      August 10, 2022
      • Gregg Thurman said:
        Yes affordability is key for Apple.

        It never has before.

        If it’s something people WANT they will figure it out. Nobody WANTS a smartphone the way they WANT iPhone, regardless of geographies or economic conditions.

        As India’s economy improves so too will incomes, and that’s all Apple needs to continue dominating the top tier of the smartphone industry.

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        August 10, 2022
        • Fred Stein said:
          In India, yes, affordability is key now. Elsewhere not so much. But gifting mitigates in India and elsewhere. iPhones, provide high utility and prestige, where prestige flows to the giver and receiver.

          The big story in India is long-term growth where the iPhone is part of a bigger Apple products and services expansion into an expanding middle class. And it’s not just India.

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          August 11, 2022
  6. George Row said:
    PED’S take: “… BTW, the Motley Fool has gone nuts for Apple lately. Who decides when to do that, I wonder?”

    I used to work for TMF, I am sure I have said this before … there is a difference between the freely available content on the Motley Fool site and the content behind the subscription wall.

    The freely available content is written by a diverse group of hundreds of independent writers, many of them are freelancers. Their opinions are their own they are truly motley – a spectrum of opinions. The intention is to benefit from a diversity of opinion. The Fool will happily publish a Bull vs Bear pair of articles looking at both sides of a potential investment.

    The subscription content is written by in house analysts. They have several different subscription services each with its own portfolio, each with its own ethos and dedicated team of analysts. However the members of those different teams share quantitive analysis, and meet at internal events from conferences, to podcasts, to the water cooler. So they clearly influence each other.

    However there really is no “official Motley Fool view” of any share. You can say that “the Motley Fool X-portfolio service is currently recommending …” a certain share or “a lot of writers on TMF’s free content are positive about” a certain share.

    But in neither side of the site are they like a Wall Street analyst who has a company recommendation and target price for a particular share where everyone sticks to the company line.

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    August 10, 2022
    • Michael Goldfeder said:
      @George Row: Thank for that explanation. Much appreciated.

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      August 10, 2022
  7. Jerry Doyle said:
    Analysts on WS a couple of years back were pontificating that the tech industry was at its peak in the smartphone era. The market was “saturated.” I always found that statement myopic and ludicrous.

    China and India have about 36% of the global population. Smartphones have not come close to penetrating all the citizens in these two countries who could use and desire a smartphone. Additionally, India is home to a fifth of the world’s youth population and the vast majority of Indian youth do not own a smartphone.

    What folk don’t understand fully is that China & India are cradling several countries, or sub-economies all in transition. For example, India has a rich coastal sub economy equivalent with a Japan or Germany. Inside India’s hinterlands are sub economies equivalent with a Brazil, South Korea, Australia or Bangladesh. We know this is true because we saw the same play out as Apple moved into China.

    The scenario continues to play out in China. India will follow China’s same pattern. As the top 150-200 million Indians (or Chinese) hit a Japan or Germany like living standard the growth impulse moves forward to another sub-economy mimicking a Brazil or Australia, and finally a Bangladesh like sub-economy in years to come. As one sub-economy gains wealth (middle class lifestyle) then the growth wave moves to the next-in-line poorer economy.

    What one may witness in a lifetime is serial transitions as one sub-economy after another hits higher living standards. As each sub-economy hits the next higher living standard the door opens to new citizens desiring a smartphone who never have owned one. This is fertile ground for any global company such as Apple to tap these burgeoning markets. That is why I questioned a couple years back all those media talking heads who proclaim smartphone market saturation and how we had passed the peak of the smartphone era.

    With China & India, the smartphone era still is in its embryonic stages of developing.

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    August 10, 2022
    • Gregg Thurman said:
      Growth is not dependent on a market that has not reached saturation.

      Once market saturation has been achieved future growth will depend on the elements that got the leaders there is the first place: customer satisfaction, perceived quality, customer retention rates, AND PRODUCT DIFFERENTIATION. Apple has the ability to positively differentiate, whereas Android powered smartphones do not.

      Apple has been able to leverage its greater control of the hardware and software that goes into iPhone, to create an ecosystem and message that is unique in the industry, and not dependent on price.

      When you have that kind of control you grow be converting buyers of competing products to buying yours.

      IPhone has the ability to draw switchers from competing products, and ASP pricing strength. When first launched iPhone ASP was about $550 (unsubsidized). Today it is about $1000, and rising, while competitors keep lowering their prices.

      Even with less than 50% worldwide market share the smartphone war is over, iPhone has won, and there is no contender to replace it.

      2
      August 10, 2022
  8. Jerry Doyle said:
    “…. My take: BTW, the Motley Fool has gone nuts for Apple lately. Who decides when to do that, I wonder?”

    My perspective is Apple is “firing on all cylinders” and the future never looked brighter for the company. This perspective now is viewed by many on WS and little doubt individuals associated with the “Motley Fool,” if they do their homework. I truly believe Apple is going to be one of the storied investments during this decade when folk in years to come examine the company’s performance level.

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    August 10, 2022
    • Steven Philips said:
      And that’s NOT a fool’s perspective! 🙂

      1
      August 10, 2022
  9. Bart Yee said:
    The rest of the analyst community is warming up to Apple and India but FOB’s here have been discussing this for over a year. To whit:

    1) Apple has spent 4 years with suppliers and contract assemblers to create local India production capacity to comply with Made in India job creating laws and regulations.(Foxconn & Wistron for iPhone 11, 12, and recently 13, plus iPhone SE 2020, and 2022, possibly the XR, Luxshare for AirPods). According to Counterpoint, India made 3.1 per cent of the world’s iPhones last year, and the proportion is forecast to increase to 6 per cent to 7 per cent this year. (Works out to roughly 6.7-6.9M units in 2021, expanding to 13-15M this year). Most of the iPhone production is slated for Domestic India sale but also provides a buffer for export sales. The wide range of recent devices allows a broad price point market approach.

    2) Apple opened their own online store last year and is building their first Apple Store in Mumbai, to open in 2023, another to follow in New Delhi, and elsewhere.

    3) 70% of the available 5G Spectrum bandwidth recently auctioned off by government, Reliance Jio $11B USD over 20 years, Bharti Airtel $5.5B USD, Vodafone $2.4B. Still leftover spectrum to go, India will probably reduce reserve prices. This bodes well for expanded 5G rollout over next 5 years and iPhone SE3, 12, 13 and beyond.

    4) If India’s economy remains relatively unaffected by economics and the Pandemic, they will recover faster than most countries.

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    August 11, 2022

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