iPhone SE at Rs 39,000: Why Apple’s plan could backfire in India

Apple’s plan to target buyers in emerging market with its smaller and cheaper iPhone SE could boomerang in India as the country’s mobile first population, whose primary computing device is a smartphone, has already shifted to larger screen phones or phablets.

With similar specifications to its outgoing flagship iPhone 6s Plus and a price tag of Rs 39,000, the iPhone SE costs approximately Rs 5,000 more and Rs 2,000 less than the base variants of the iPhone 6 and 6s respectively on popular e-commerce websites. The device is slated for launch in India sometime in April.

The iPhone SE will replace Apple’s ageing iPhone 5s model which currently retails at around Rs 18,500 in India. Despite selling older models in the country with hefty price cuts, the trend in the last two quarters has seen a shift towards Apple’s larger iPhone 6 and 6s models.

“If you see the older phone models, even though Apple is pushing them at lower price points, are selling less. The sales mix of Apple phones in the last two quarters (second half of 2015) in India is made up by 75-80 per cent of the iPhone 6 and iPhone 6S,” said Niel Shah, research director at Counterpoint Research. “A 4-inch phone is a disappointing thing at Rs 39,000 in India. The addressable market is very small. It would have made sense if the device size is 4.7 or 5 inch.”

The share of devices with screens smaller than 4-inch and from 4 to 4.5-inch in India in December 2015 was to 7 per cent and 10 per cent respectively, a big drop from 15 per cent and 26 per cent in the same month in the previous year. On the other hand, devices with screen sizes of 5.5 to 6 inch cornered 15 per cent of the market share, up from just 4 per cent.

“Only 10% of the total smartphones sold at the end of 2015 were 4” screen size which has shrunk from almost one-fourth of the market a year ago. In just one year, the consumer preference has completely shifted towards phablets,” said Shah.

Apple claims that it sold over 30 million 4-inch iPhones in the past one year, which would roughly contribute to 15 per cent of the company’s overall iPhone sales. While the company is offering incentives such as the latest processor, Apple Pay, a great camera and the latest software with the iPhone SE over the 5s and 4s, the small screen size might still remain a detriment to sales.

“India is a mobile first country. There is a clear trend towards consumers needing a bigger screen size. Not many people own a laptop or tablet, meaning the phone is the primary device not a second or third device,” adds Shah.

Apple has been increasing its focus on India, witnessing a 76 per cent growth in iPhone sales in the country during the October-December quarter, while globally sales growth slowed to just 0.4 per cent. Another move in this direction is Apple’s application with the government of India to sell certified pre-owned phones in the country.

Smartphone penetration in India, the second largest mobile market after China, is less than 15 per cent and is dominated by Google’s Android operating system. Nine out of 10 smartphones sold in India is an Andriod phone with Chinese and local phone makers such as Xiaomi and Micromax offering more powerful smartphones at lower prices than Apple’s iPhone.