Will aggressive iPhone 12 pricing ruin Apple’s prospects in this market?

Will aggressive iPhone 12 pricing ruin Apple’s prospects in this market?
Will aggressive iPhone 12 pricing ruin Apple’s prospects in this market?
Apple’s (NASDAQ: AAPL) The latest generation iPhone 12 seems to have made the right impression on customers, according to reports on initial response to new device specs.

Well-known Apple analyst Ming-Chi Kuo estimates that pre-orders for the iPhone 12 are more than twice as high as for the iPhone 11 (currently only two of the four iPhone 12 phones are available for pre-order). He predicts 1.7 to 2 million devices will be pre-ordered in the first 24 hours, compared to 500,000 to 800,000 iPhone 11 devices in the same period last year.

While this is good news for Apple, and testament to the company’s aggressive pricing of the 5G iPhone range, there is one crucial market where prices for the new smartphones are exorbitant: India. That’s not a good sign for Apple, especially as the outlook in India has been positive lately.

Apple is again making wrong prices in India

Apple brought a 5G device to the US with the iPhone 12 mini at an attractive price of $ 699. However, the same device costs 69,900 Indian rupees (nearly $ 953). The standard iPhone 12 with a 6.1-inch display costs 79,900 Indian rupees (almost 1,090 US dollars) for the 64 GB version, which is way above the price of 799 US dollars in the USA

The following table provides an overview of the large differences in iPhone 12 prices between the US and Indian markets.

device US price
(in $)
India price
(in rupees)
India price
(in $)
India premium
over the USA
iPhone 12 mini (64 GB) $ 699 69.900 953 $ 36%
iPhone 12 (64 GB) $ 799 79.900 1.090 US-Dollar 36%
iPhone 12 Pro (128 GB) 899 $ 1,19,900 1.634 US-Dollar 82%
iPhone 12 Pro Max (128 GB) 1.099 US-Dollar 1,29,900 1.771 US-Dollar 61%

Source: Prices from Apple’s online shops in India and the USA 1 USD = 73.35 Indian rupees as of October 20th

It is clear that when compared to consumers in the US, Indian consumers will have to pay the premium to pick up the latest line of iPhone products. This is nothing new as import duties and other taxes have historically increased iPhone prices in India. In addition, the 5G rollout in India is expected to be at least two years away. Nationwide deployment can take at least four to five years.

Indian consumers may not be willing to cough up a princely sum for a 5.4-inch device, considering that competitors have cheaper options that offer better technology, such as higher screen refresh rates, more memory, and bigger screens. As a result, Apple could miss the opportunity to capitalize on the hype surrounding the iPhone 12 and capture significant market share – especially since the average price of a smartphone in India is expected to be just $ 170 this year.

However, Apple appears to have a secondary plan. Despite the exorbitant pricing of the iPhone 12, Apple could continue to gain momentum in India’s pre-5G smartphone market, which is reportedly growing at an average annual growth rate (CAGR) of 14% according to third-party estimates.

Plan B

The new iPhone 12 series is not currently manufactured by Apple in India, so there are huge import duties and taxes on the device. A report by Indian business magazine Business Today indicates that Indian consumers will pay 21,344 Indian rupees (around $ 290) for the iPhone 12 mini thanks to 22% tariff and 18% tax on goods and services (GST).

All is not lost for Apple though – it has a backup in the form of the iPhone 11 to help drive sales. Last year’s flagship sold like hot cakes Amazon India on sale during the Christmas season thanks to its attractive price of 47,999 Indian rupees ($ 654). The ecommerce giant pointed out that iPhone 11 sales on the first day of sales exceeded the total number of iPhones sold throughout the 2019 sales period.

The device originally launched in India last year when it was an import unit for 64,900 rupees (around $ 885). However, Apple started producing the device locally in India in July of this year, saving the company import duties and taxes. As a result, the device is currently being sold at a huge discount off the starting price.

The good news for Apple is that the iPhone 12 could be made in India. Leaked documents from the Brazilian telecommunications authority Anatel suggest the device could be manufactured in multiple markets, including India and Brazil. Such a development may not come as a surprise given that Apple’s contract manufacturers are increasing their presence in the country through a government sponsored program.

But until an India-made iPhone 12 hits the market, Apple can expect the iPhone 11 to do the heavy lifting. And once Apple’s contract manufacturers hone their skills and start making the country’s newest models, the iPhone 12 may be cheaper there.

This way Apple can continue to attract more users to its ecosystem in India despite the high initial price for the iPhone 12. It can maintain this momentum going forward by gradually improving its manufacturing and sales presence and creating the conditions for potentially lucrative growth in the 5G market, where 5G device deliveries could reach 144 million units by 2025, according to third party estimates.

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