While Apple (NASDAQ:AAPL) seems to have gotten away with its higher-than-expected price of the iPhone 5C in the U.S. and China, the high cost of the device will hit the company where it hurts in India, according to a report from Bloomberg.
In India, carriers don’t offer subsidies on devices with a contract signing, as is common in the United States. India has the cheapest call rates in the world, making device subsidies impossible for wireless carriers there. The iPhone 5C, which hasn’t yet been released in India, starts at around $549, which would put the device out of reach for most Indians.
India is the fastest-growing smartphone market in the world, so Apple is essentially excluding itself from participating in that growth with its refusal to make a real low-cost device. According to research from IDC cited by Bloomberg, the below $200 segment of the smartphone market is the fastest-growing area of the market in India. India is also expected to overtake the U.S. as the second-largest smartphone market, behind China, by 2017.
“Apple will pick up some volumes by discounting their older devices,” Nitin Soni, a Singapore-based analyst at Fitch Ratings said in an interview with Bloomberg. “But it doesn’t look like Apple has a strategy to get a large chunk of India’s expected big surge, at least not yet.”
Many were concerned the same phenomena would occur in China after the new iPhone line was released, but Chinese carriers have come up with plans that allow them to subsidize the devices. Certain Chinese carriers have even created long and expensive contracts that allow customers to take home one of the new iPhones for free. A recent study suggested that Apple’s market share in China will double in the next year as it catches up to rival Samsung (SSNLF.PK) in that country.
Apple CEO Tim Cook fought criticism on the high price of the iPhone 5C by saying: “There’s always a large junk part of the market. We’re not in the junk business.” That strategy hasn’t proved Apple wrong so far, as the company saw a record-breaking opening sales weekend for the new iPhone lineup, but as the smartphone market becomes saturated, growth in emerging markets like India will become more important. It remains to be seen if Apple will have to start making what it sees as junk or risk losing a crucial chunk of the market.
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