Desi Slice 4: How Apple Strategized Spectacular Success In India
Sep 08 - GCC Enters Co-Creation Mode. GitHub CEO Predicts AI will help explode non-English software developers
Photo by Rupinder Korpal: https://www.pexels.com/photo/bride-in-casual-pose-drinking-lemon-21881566/
How has Apple created dominance profitably in the Indian smartphone market?
In fiscal 2024, Apple Inc. achieved a business value exceeding ₹2 lakh crore (~ $25 billion) in India, driven by increased iPhone exports and domestic sales of products like MacBooks, iPads, and Watches. Apple's growth is notable for its rapid expansion in production and exports, likely the fastest by any company in India in the past 50 years.
Key factors include leveraging the Production-Linked Incentive (PLI) scheme, strategically choosing manufacturing locations in South India, and enhancing sales through revamped distribution strategies and branding.
From 2016 to 2020, Apple worked through a detailed consultation process and moved into execution after the PLI scheme was kicked off in 2020. Foxconn, Wistron (now owned by the Tatas), and Pegatron - this combination allowed manufacturing from multiple locations in South India.
Online partners, distribution partners, Apple Experience Stores, and reseller networks managed to keep pushing the envelope and get deeper and wider into the market. This helped keep domestic sales increasing while the exports were soaring anyway.
iPhone sales contribute over 60-65% of revenues in India (globally it is only 51%).
Apple Inc. hit a milestone by exporting 85 percent of the freight-on-board production value, or Rs 40,145 crore, (about $5 billion) of its iPhones in April-July FY25. “Freight-on-board” refers to when the ownership and the risks of shipping goods shift from seller to buyer. By doing this, Apple has for the first time exceeded its target given to the government to export 81 percent of its iPhones by value by the end of the production-linked incentive scheme (PLI) in FY26.
After setting a quarterly revenue record for April-June, Apple is projected to increase its revenue by 20 percent, crossing $9.5 billion in 2024. The revenue growth will be driven by the iPhone and other non-handset categories, such as MacBooks and iPads, which will contribute significantly to the increase. (source: Counterpoint Research)
Apple's expanding market share in India is driven by its premium positioning, brand aspiration, and a strategic focus on increasing retail presence in tier-2 and tier-3 cities. Increased local manufacturing under the 'Make in India' initiative is helping reduce costs and the company is expecting over 20 percent growth in revenues in this calendar year as other categories also pick up.
Apple's ecosystem in India is expected to spawn as many as 600,000 jobs by this fiscal year, demonstrating a massive success in the operations of the iPhone maker. This might not be large enough to move the needle significantly compared to what China, for example, produces in a year - but remember, this was triggered as a China +1 strategy. India was nowhere on the phone maker’s radar in the pre-covid era.
The opportunity thrown up during a global supply chain debacle following the COVID pandemic was appropriately seized by India with its policy machinery targeting world-leading manufacturers who were looking for an alternative and safer destination.
Smartphone Market in India: (source: Counterpoint Research, public domain).
India has overtaken the US to emerge as the second-largest market for 5G smartphones after China in the first half of 2024, with affordable models of Xiaomi, Vivo, Samsung, and others driving the trend. source: (Counterpoint Research)
Apple led Smartphone shipments in volume globally (over 25% market share driven by the iPhone 15 and 14 series).
Samsung came in 2nd (with 21% market share) and Xiaomi came in 3rd (driven by Indian sales).
GCC Units in India Enters Co-Creation Mode
The GCC value chain is on an upward trajectory as more value addition is happening along the path.
Co-creation
Product and Solution Design is jointly done together with select government bodies, PSU research agencies, and/or academic institutions in some cases. Here are some illustrations.
Thales India
Thales is a French multinational company that provides a wide range of advanced technologies, solutions, and services in the aerospace, defense, transportation, and security markets.
Thales is working with BDL Bharath Dynamics Limited. Bharat Dynamics Limited (BDL) is an Indian state-owned aerospace and defense company that manufactures a range of missile systems and allied defense equipment.
There is a joint co-creation currently underway between the two companies following an Agreement to manufacture facilities in India for precision strike laser-guided rocket production from this joint effort.
As stated earlier, these are not overnight successes but have been carefully thought through and progressed over a decade. Initially, it was just an engineering platform established for India - then there was a need to stabilize the engineering operations with global engg teams, ensure uniform processes, practices and the two would work as a seamless team
Then it was upgraded to become a part of the global supply chain and now it is into manufacturing.
Simultaneously Thales India is also partnering with BEL for research work which it intends to monetize once the test products pass the gates in global markets. Similarly with DRDO India in the development of naval anti-ship missiles. Indian engineering teams at Thales have been granted over 100 patents.
This does a lot for employee morale and enriches the ecosystem overall too. Some of these folks could potentially spin off new startups or join other competing firms and create fresh thinking - something so much required to maintain the vibrancy and richness of the industry at large.
A detailed state of the industry report covering GCC, in particular, was carried in the Desi Slice #1, Aug 26 issue for those of you interested in the story.
Continental
Continental is a major German automotive parts manufacturer with a strong global reputation. The company has a significant footprint in India, with multiple manufacturing facilities, R&D centers, and technology hubs across the country.
One of Continental's key collaborations in India is with the International Institute of Information Technology Bangalore (IIITB). Continental and IIIT-B are working together on advanced automotive technologies, particularly in areas like autonomous driving, connected vehicles, and mobility solutions.
The partnership allows Continental to leverage IIITB's expertise in domains like artificial intelligence, machine learning, and software engineering to develop innovative automotive products and services tailored for the Indian market.
Continental is co-creating in the areas of autonomous mobility and safety systems -2 projects and a third project on Radar with IIT-B
Salaries at GCC
It has been observed that GCC payscales are typically about 12-20% higher for comparable roles in the regular IT industry. This comes at a time when some GCCs are beginning to be located in smaller towns like Coimbatore, Nagpur, or Pune -with a lower cost of living that makes the positions even more attractive due to larger savings potential.
Of course, the downside could be the lack of a range of school options (but this is also going away) as new schools with integrated townships, play areas, multi-language curricula, and international syllabi have started emerging.
Please see the earlier Desi Slice 1 link here for a detailed analysis. (On the school syllabus I am not a believer frankly -because we have far richer Indian education material and cultural values that make more sense but that is a private matter).
Grant Thornton
Grant Thorton is a global professional services firm that provides assurance, tax, and advisory services to organizations across various industries. In India, Grant Thornton has a significant presence, with offices in major cities like Mumbai, Delhi, Bengaluru, Chennai, and Hyderabad.
Grant Thorton Bharat -many Indian leaders who are also global product leaders are based in India their understanding of both local and global practices makes them uniquely capable of running both well.
Planview
Planview is a global enterprise software company that provides solutions for:
Work and Resource Management: Helping organizations manage projects, resources, and work across the enterprise.
Product Portfolio Management: Enabling companies to manage product portfolios, innovation, and strategic planning.
In India, Planview has a significant presence, with a Development Center in Bangalore, which serves as a hub for product development, engineering, and innovation.
World #1 Soon: India's Software Development Pool, GitHub
India to become the world's largest software developer source by 2027 with AI fueling the development space in a big way. This was the forecast made by GitHub CEO Thomas Dhomke in a recent visit to Bangalore.
According to GitHub CEO Thomas Dhomke: (source official press link on the site)
GitHub onboarded 2.2 million developers in India this year making a total of 15.4 million. This compares to 5.1 million developers in 2021. The US is the current reigning biggest source with a total of 21 million developers but GitHub CEO says he expects this to change as India will outgrow this by 2027.
The fundamental difference that AI brings to the industry, is that it destroys the language barrier for developers. English will no longer be the default language to speak to a machine - and programming can now be done in the natural language of choice. The full impact of this will become known in the next few years.
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