Chindia – Where Apple iPhone Failed Terribly

by Leplan on January 27th, 2010 1

Apple is touted to have brought great products like Mac, iPod, iPhone, Quick Time, iTunes etc., to the world. Most of these products have become category killers in their respective industries. But when it comes to China and India, Apple has failed miserably. Apple has failed to sell Mac, iPod and failed more in case of iPhone.

Let us analyze the company’s failure and the reason behind it.

Country Profile: China

iphone india

Population: 1,338,612,968 (July 2009 est.) – Ranked 1

Major Age Bracket: 15- 64 years (72.1% of total population)

Mobile Phone Users: 634 million (2008) – Ranked 1

Internet Users: 298 million (2008) – Ranked 1

Country Profile: India

Population: 1,166,079,217 (July 2009 est.) – Ranked 2

Major Age Bracket: 15- 64 years (63.6% of total population)

Mobile Phone Users: 427.3 million (2009) – Ranked 2

Internet Users: 81 million (2008) – Ranked 4

Source: The World Factbook by CIA

The above facts and figures of Chindia are mouth watering for any business man or a company. A colossal market with majority as youths is certainly a great prospect for any business. On top of that, when you see China and India as the top 2 countries in terms of mobile phone uers, any mobile phone manufacturing company like Nokia, Apple, Samsung etc., can blindly say that Chindia is a great market. But sadly, for Apple this has not been the case. Its success stories elsewhere are not being repeated in world’s top 2 biggest nations. Whay is that? Let’s see..

1. Cost of iPhone

Cost of iPhone in India and China is high as compared to the US markets. iPhone 3G (8GB) costs around 4 times the cost as available in the US market. This has made consumers in Chindia reluctant in purchasing iPhones. The higher cost of iPhone has been attributed to the lack of subsidy provided by the Service proviers. In US, iPhone was a hit because it tied with AT&T which considerably subsidized the iPhone cost in exchange for a long term contract with the customers. This is not the case in Chindia.

Moreover, Chindians are found to buy iPhone in US and use the cracked versions in their home turfs. Due to this, they have been shying away from buying iPhone bundled with service provider in China and India.

In India, today, one can buy a Tata Nano at the cost of around three iPhones. Moreover, at the cost below than that of an iPhone, a customer can buy a modern iPhone in China and India. Hence, cost definitely has played a big part in dragging Apple’s success in these regions.

2. Marketing Strategy

It sounds funny but the truth is the market strategy adopted by Apple’s partners in India and China is one of the major reasons why iPhone is selling bad there. We have not seen aggressive marketing campaign by Airtel (in India) and Unicom (in China). There could be various reasons behind this but the bottomline is Chindian customers are not exposed to iPhone ads as they would have liked.

India and China did not really came up with a bang while launching iPhone like it was done when iPhone was first launched in the US. This certainly talks volume. The US market was nicely built up for the iPhone release but Chindia’s case was different, due to which iPhone was not able to “pull” many customers. Although the marketing has picked up China of late, many believe, it would have been a different story had China story started with a big splash.

3. Behavioral Avenue

Chindians are, in may ways, different than Americans when it comes to mobile phone usage. In US, customers are used to buy iPhones through service provider in exchange for a predefined plan. However in Chindia, customers are not used to such bundled service. Chindians prefer purchasing prepaid phone cards rather than getting attached to an operator and paying charges on a monthly basis. It seems, in retrospect, that this very facet of Chindians was never studied when iPhone was first launched.

4. Lack of 3G features

Strange as it may sound but iPhone 3G was launched in India and China where, tiil date, 3G network is not yet madeavailable by the Government. This has seriously crippled the customers from using “3G” features in their iPhones. To add salt to injury, Chinese Government has not allowed Wi-Fi connectivity in the mobile phones. Hence it really doesn’t make sense for customers to use 3G enabled iPhone in GSM network after all they will not be able to enjoy 3G features as done by US consumers.

5. “Smart” Competition

The problem with Apple is that most other smartphone players are already in India and China. Worst part, they have already learnt the Apple’s failure story and are ready to cash in on that. Hence, Apple is likely to get stiff competition in Chindia than ever before. Nokia is already a key player with largest market share in India and China while others like Samsung, Motorola, Dopod (Sanghai based), Amoi (Fujian based) are already making strong moves. Another to be big player, Google is already planning to enter into China. Thus Apple will find a tough time to break the shackle. Currently it is stuck in the limbo to whether drop the price and focus on volumes or compromise volume and focus on “upper class” image.

Ending Thoughts

Apple needs to innovate more to conquer these important markets. These are the two largest Mobile Markets today, and they are likely to become G3 along with United States by 2030. Google and Microsoft have strong hold in India, and are making inroads in China. They have significant workforce in these Asian nations. Apple cannot ignore the fact for long and use them just as a back-end factory.

Apple need fresh thoughts on these emerging economies, and the company needs a head start from the top.

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