This essay is from the latest edition of Exporter, the new Rest of World newsletter about Silicon Valley’s impact outside the West — and how international tech companies are changing Silicon Valley. Subscribe here and receive new installments in your inbox every Thursday.
Welcome back to Exporter! I’m in Costa Rica this week for RightsCon, which promises to be really interesting this year. If you’re not up on RightsCon, it’s an international conference about digital rights, organized by nonprofit AccessNow. I’ll be paying particular attention to this panel about the Meta Oversight Board and other platform accountability efforts, since it ties into a lot of what we’ll be covering in Exporter. I’ll have a full report next week, but in the meantime, drop me a line if you want to meet up!
The big U.S. tech news this week was Apple’s developer conference, where the company revealed a $3,500 headset called the Vision Pro. It’s an interesting project and there are lots of good pieces you can read about it — but I have to admit I find the hype kind of silly. It’s another product with no clear user base, priced for the highest of high-end tech consumers. Even by Apple’s standards, this is a niche product, and anyone comparing it to the launch of the iPhone should be taken with a huge grain of salt.
If you’re looking for a bold, company-defining gamble that may decide the future of Apple, I’d suggest you look outside the U.S. — namely, at India.
First, a bit of stage-setting. For all the excitement over the new headset, the iPhone is still the bedrock of Apple’s business. More than half the company’s revenue comes directly from iPhone sales ($51 billion out of the $94 billion the company reported for Q1 this year), and even ancillary businesses like the App Store and Apple Watch mostly rely on customers who already bought the phone. If Apple is to keep growing, it needs to find ways to sell more iPhones.
But there’s a problem: In most countries where Apple operates, the people who can buy an iPhone already have one. Global smartphone shipments peaked some time around 2016, and Apple’s U.S. market share has hovered around 50% that whole time. The company’s big success has been its expansion into China, but that has slowed down in the past few years. In the most recent quarter, the only region showing significant quarter-to-quarter growth was an awkward category called “Rest of Asia Pacific” — basically everywhere in the continent that isn’t Japan or China.
In most countries where Apple operates, the people who can buy an iPhone already have one.
A lot of that growth is happening in places like Indonesia and the United Arab Emirates, but Apple has its sights set on India. Only 4% of smartphones sold in India are iPhones, and Apple is hoping that economic growth in the country will give rise to a new class of iPhone users.
“India is an incredibly exciting market. It’s a major focus for us,” CEO Tim Cook said on Apple’s most recent earnings call. “A lot of people [are] entering the middle class, and I’m hopeful that we can convince some number of them to buy an iPhone.”
It isn’t just talk. In April, the company opened its first Apple stores in India — one in Mumbai and one in Delhi. Cook followed up with a week of high-profile appearances, including at an IPL cricket match and Mukesh Ambani’s skyscraper mansion in Mumbai. There have also been ongoing talks about Apple moving manufacturing to India, which my colleague Nilesh Christopher has been tracking closely — although that side is so complex that it will have to wait for another newsletter.
Despite Apple’s progress in the world’s most populous country, there are real questions about how big it can grow in India. For all its economic development, India is still a poor country, and a combination of taxes and a lack of refurbished options make the iPhone a particularly expensive phone there. An iPhone can cost over 70,000 rupees (roughly $850) in a country where the average monthly salary is less than half of that.
In India, iPhones are seen as “a way for people to show off wealth,” as our South Asia Editor Durga M Sengupta explained to me. “There’s a clear purchasing power gap here that Apple hasn’t encountered in most markets, and it has barely addressed it in India,” Durga said. “Indians have always had Samsung and cheaper Chinese alternatives to turn to. Also, Android culture is well-rooted in the country: Google is seen as a provider of free services, whereas Apple is not.”
In some ways, this is the downside of the strategy that brought Apple so much success in the last decade. By capturing the high-end smartphone market (and sticking hard to its price points), Apple made better profits than its Android competitors and grew faster as a company. But in the Indian market, that commitment to high-end branding has become a liability.
So far, the news is good: The two Apple stores are setting sales records for the country, and the company is surely doing everything it can to keep the momentum going. But in the long term, its ability to sell iPhones in India (and other similar countries) is easily the biggest challenge facing Apple. And for all the big predictions about augmented reality, this challenge is what will make a much bigger difference to Apple in the years ahead.
