For many investors, much of the bullish case for Apple (
AAPL
,
quote
) stems from its growth in emerging markets. But when it comes to
Apple, not all emerging markets are created equal. In particular,
India (
INDY
,
quote
) remains a disappointment for the American tech giant.
[caption id="attachment_68984" align="alignright" width="300"
caption="This is as close as you'll get to a real Apple store in
India"]
[/caption]
While China (
FXI
,
quote
) and Brazil (
EWZ
,
quote
) have proven to be growth engines for Apple products -- even
though many Brazilians buy their Apple products abroad -- other
emerging markets have been less kind to Apple. In particular, as
was indicated during the company's most recent quarterly conference
call, Apple's growth in India remains weak.
Apple CEO Tim Cook indicated the company has fantastic potential
in India -- but in the future. For now, Cook is of the impression
that "
Apple has some higher potential in the intermediate term in
some other countries
. This doesn't mean we're not putting emphasis in India. We have a
business there and it's growing but my own perspective is that in
the intermediate term there will be larger opportunities outside
(the country)."
Like other foreign firms looking to operate in India, Apple's
problems in the country are manifold. The company has little retail
penetration. Unlike China where Apple has a number of retail
outlets, there isn't a single Apple store in India. Purchasing an
iPhone is possible, but only through local carriers like Bharti
Airtel.
3G and 4G penetration in India
is inconsistent and limited
, respectively. Because many Indian customers are unable to access
the full functionality of the iPhone, splurging for such a gadget
doesn't often make a lot of sense. Until India can clean up the 3G
and 4G mess, the iPhone is likely to remain a glorified fashion
accessory for the upper crust of Delhi, Mumbai, and Bengaluru.
In order for Apple to thrive in India,
the government and economy must get its collective act
together
. Slowing growth and a government unfriendly to foreign firms could
render Apple's growth in India limited for some time.
Disclosure: Author is long AAPL
