Apple banks on India sales despite regulatory hurdles

Despite the Narendra Modi government rejecting virtually all of Apple Inc's requests for special treatment, including its latest one for Customs duty concessions for its suppliers who to manufacture in the country, the Cupertino-based firm has pinned its hopes on India to bolster flagging global sales of the iPhone.

At an analyst call on second quarter earnings early Wednesday (India time), chief executive Tim Cook said, ''We're very optimistic about our future in this remarkable country with its very large, young, and tech-savvy population, fast-growing economy, and improving 4G network infrastructure.''

He said in his opening address that revenue in India grew by strong double-digits during the quarter ended 1 April, setting a record.

Chief financial officer Luca Maestri quantified the growth for India at over 20 per cent. The company also achieved double-digit growth in the US, Canada, Australia, Germany, the Netherlands, Turkey, Russia and Mexico, Maestri said. ''Our growth rates were even higher, over 20 per cent in many other markets, including Brazil, Scandinavia, the Middle East, Central and Eastern Europe, India, Korea and Thailand,'' Maestri said.

Globally, Apple sold 50.76 million iPhones in its second quarter financial year, down from 51.19 million a year earlier during the corresponding period. In India, around 2.5 million iPhones are estimated to have been sold between October 2015 and September 2016.

While the talk on India revolved around high growth (mainly of iPhones) and 4G network access, top executives remained tight-lipped on the regulatory hurdles Apple faces in the country as well as on the company's plans here.

For instance, when Simona K Jankowski of Goldman Sachs asked Cook if it was reasonable to assume that Apple would sell 10 million to 20 million iPhones in India next year, keeping in mind the growth and rollout of 4G, Cook spoke of having ''a ton of energy going into the country on a number of fronts''.

According to the transcript of the analyst call available at Seeking Alpha website, Cook said, ''We've been investing quite a bit … it is the third-largest smartphone market in the world today behind China and the US … so we believe, particularly now that the 4G infrastructure is going in the country and is continuing to be expanded, there's a huge opportunity for Apple there. So that and the demographics of the country is why we're putting so much energy there.''

To another question from Jim Suva of Citigroup Global Markets on Apple's road map for India and whether it needed to work more with the government to set up stores and production units as well as to improve sales, Cook agreed that the company was ''underpenetrated there''.

The company is ''bringing all the things that we brought to bear in other markets that we've eventually done well in, and that's from channel to stores to our ecosystem and so forth,'' Cook added.

He called India's growth rates in iPhone sales ''really good by most people's expectations'', but added, ''maybe not mine as much''.

Cook's meeting with Prime Minister Narendra Modi last year in New Delhi had centred on the promise of the India market, and the country has delivered in terms of consumer response, he said.

The company is bringing all the things to the India market, Cook said. But when and how are among the questions that have kept industry watchers glued to the scene.

Although Apple had proposed early in 2016 to set up fully-owned stores in India, the 30 per cent local sourcing norm as part of the foreign direct investment policy (FDI) policy for single brand retail has kept the plan on hold.