As Apple (AAPL) prepares to launch its newest iPhones next month, the company could see big sales even in emerging-market countries where consumers have lower incomes.
Conventional wisdom says Apple needs to offer a much cheaper iPhone – current models start at around $450 – to succeed in countries such as Russia, India and Vietnam. But hidden amongst the hundreds of millions of mobile-phone buyers in those countries is a sizable and growing base of consumers who value the cachet and quality of iPhones and can afford the price tag, analysts say.
Apple’s market share in less wealthy countries lags far behind its share in countries such as the United States, where more than 40% of smartphone users have an iPhone versus about 50% who use phones running Google’s (GOOGL) Android software. Apple’s high share comes in part from wealthier customers but is also aided by carrier subsidies – which mask the total cost of a phone – and Apple’s prior success with its iPod music player that attracted millions of people to its iTunes store.
In countries including China, India, Indonesia and Malaysia, however, Apple’s market share remains around 10% or less, according to tracking data from Counterpoint Technology Research. And those are among the fastest-growing markets for smartphone sales.
Room to grow
While Apple will never hit the kind of share it has in the United States without cheaper products, it has plenty of room to grow in emerging markets with an expanding number of middle-class consumers, says Ken Hyers, a wireless analyst at Strategy Analytics. The markets are so vast and growing so quickly that Apple, which has sold 164 million iPhones over the past 12 months, doesn’t need to be among the best sellers to still pick up huge sales.
“Apple can honestly expect healthy future growth from emerging markets, even as that growth is outpaced by orders of magnitude by Android in those same markets,” says Hyers.
Apple is expected to unveil two new, larger-screen iPhone models and possibly a smartwatch of some sort at a September 9 event, according to numerous media reports. Apple has not confirmed the reports.
Bigger screens will help Apple attract even more customers away from arch rival Samsung, the only other major player in premium-priced phones for emerging markets, says Peter Richardson, research director at Counterpoint.
“Samsung has been the only credible competitor, but we’re seeing them stumbling before our eyes, “ Richardson says. “That leaves the way wide open for Apple to continue to dominate that segment.”