Ex Apple CEO John Sculley Explains Why Apple Won’t Sell a Low Cost iPhone in India and Other Countries.
Ex Apple CEO John Sculley, who is famous not only for being a top technology executive, but also as the man responsible for removing Apple icon Steve Jobs from his position years ago, spoke with media about his thoughts on Apple and the mobile market in India.
Sculley was in India to promote a line of smartphones that are specifically geared for the low cost market. During the interview with the Economic Times, he could not escape giving his thoughts and opinions, on why his former employer, Apple Inc. (AAPL), refuses to sell a low cost iPhone for the Indian market.
India is considered one of the fastest growing markets for mobile devices with a massive population base of over a billion people (1.237 Billion as of 2012), and an estimated 18% market for smart devices (this would approximately place the potential customer figure at 180 Million people at least).
Apple, despite having a significantly lower market share versus its competitors in India (Samsung has roughly 35 to 40 %), will only go as far as re-offering an old model like the iPhone 4, instead of finding a way for customers in India to afford an iPhone 5s or iPhone 5c. Apple did this recently in India as well as in Indonesia.
So why hasn’t Apple taken advantage of the Indian market? Should there be a cheaper iPhone (with downgraded specs and features) for markets like India?
This is what Sculley has to say.
?You can repackage a phone into monthly installments, but the reality is – it’s still very expensive. Apple tried with the 5C, it failed because they compromised on product as they used an old processor and left out certain features.
Apple’s expectation from product quality is so high, but (their) business model requires high gross margins. They generate incredible amounts of cash, but if they compromise on that, their stock goes down. They have a dilemma – either miss the market where 70 percent of the industry ?is, or risk (the) falling of their stock price dramatically if they go after the market. One company’s dilemma is another company’s opportunity.?
In short, Sculley thinks, that Apple’s business model, where premium devices with large margins are being sold in large enough quantities in many countries, cannot afford to come out with an inferior product with low margins that might affect their brand image and reputation (as well as stock prices). A cheaper iPhone for India might have disastrous effects on their marketing and sales efforts in countries where the premium priced iPhones sell like hotcakes.
Another factor affecting Apple’s strategy in India is the lack of subsidy from telecom companies to make the smartphone handsets affordable to the ordinary customer. Telecom companies in India reportedly do not offer the same contracts that are available in many countries that subsidize the cost of the phone unit.
For now, ordinary customers in countries like India will have to settle for the iPhone 4, unless they can afford to purchase the latest iPhone 5s or 5c (and the coming iPhone 6) from overseas.