Apple Makes A Smart Move To Boost iPhone Sales

Global smartphone sales are declining, according to a report by market intelligence firm IDC. Smartphone sales fell 4.1 percent last year, and the industry is expected to take yet another hit in 2019 on account of weakness in key markets such as China. All this has dented Apple's (NASDAQ:AAPL) iPhone sales.

India, however, is likely to defy the broader smartphone slowdown in 2019, as sales are expected to increase 13 percent, according to analytics research firm techARC. The premium smartphone segment (devices priced above $700) is expected to record the highest growth of 27 percent. Not surprisingly, Apple is now taking serious steps to make its presence felt in this market.

Apple makes a much-needed move

Apple began making older iPhone models in India two years ago, but it is on the verge of adding new models into the mix. Foxconn, Apple's contract manufacturer, will start producing iPhone models on a mass scale in the Indian market later this year, according to Bloomberg.

According to the report, Foxconn is all set to begin production trials of new iPhone models in India before full-scale operations are launched at a facility outside Chennai later this year. This marks a change in strategy from Cupertino as it desperately tries to crack the Indian market because of its potential growth.

Apple earlier tried to make a dent in India with a strategy of peddling older iPhones, believing that the relatively low price of models such as the iPhone 6 and the iPhone SE would help increase sales. But the move backfired as Indian customers preferred devices from Chinese manufacturers such as OnePlus that packed impressive features at aggressive price points.

Apple's existing facility wasn't equipped to produce the latest iPhones, which were instead imported into the Indian market. The lack of local manufacturing for devices such as the iPhone X, XR, XS, and others meant that they had to be priced at a big premium because of a 20 percent import duty.

For instance, the 64GB iPhone XR is priced at $749 in the U.S., but the same model was launched at a price of just over $1,100 (76,900 Indian rupees) in India. But because of poor sales -- Apple shipped just 1.7 million iPhones in India last year, down nearly 50% year over year -- the company was forced to reduce the XR's price to 59,900 rupees (approximately $861 at the current exchange rate).

Even that is significantly more than the XR's price in the U.S. On the other hand, Samsung's latest Galaxy S10 starts at just over $960 in India, while the same device is priced at $900 in the U.S. So there isn't a really big difference in the price of Samsung's flagship device between the U.S. and India.

Samsung operates the world's largest mobile device manufacturing plant in India. Since it produces devices for the Indian market locally, it doesn't need to pay any import duties. Moreover, the South Korean giant has a 34 percent share of India's premium smartphone market, according to Counterpoint Research.

Once Apple starts producing its latest phones locally in India, it will have a chance to improve sales by pricing its devices more competitively. That could help offset the weakness it is witnessing in other markets.

Getting serious about India

Local manufacturing isn't the only way Apple is trying to find its way into the Indian market. According to a recent report, Apple may be prepping a 4.8-inch device packed with an end-to-end AMOLED display.

Foxconn will reportedly start making this device in India later this year. If that indeed happens, Apple will be able to price the device competitively to make a dent in the midrange smartphone market in India.

Building a new midrange iPhone in India would be a smart move by Apple, because the company would be able to target a bigger market and bring more users into its ecosystem. It could pitch its premium smartphones to those customers in the future, because the purchasing power of Indian consumers should increase steadily due to the country's robust economic growth.

It isn't too late for Apple

Apple ignored the Indian market for a long time as it focused on China and other regions, but it still has time on its side. Cisco estimates that the number of smartphone users in India will jump from 404 million in 2017 to 829 million in 2022.

So Apple can still make a dent here if it moves quickly. Given the massive opportunity present in India, success there could boost its flagging smartphone sales in the long run.

This article originally appeared in The Motley Fool.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.