India Rejects Apple’s iPhone Retread Plan

India’s telecommunications ministry has rejected Apple’s proposal to sell refurbished iPhones in the country, Bloomberg reported this week.

Officials rejected the proposal based on rules that prohibit importing used electronics, according to Reuters.

The country’s environmental ministry nixed a similar request last year.

With smartphone sales starting to stall, India could become an important market for Apple, although it has only a 2 percent market share there.

“India is slated to experience strong smartphone growth in the coming years,” said Ross Rubin, senior director for industry analysis atApp Annie.

“Much of that growth is slated to come from inexpensive Android handsets,” he told the E-Commerce Times. “Selling refurbished iPhones is one way for Apple to compete without having to produce a device that compromises on features or components.”

Vital Market

The Indian market is vital to Apple, especially with sales in China slowing down, said Patrick Moorhead, principal analyst atMoor Insights & Strategy.

“Apple has dominated the high end in North America and Western Europe, picked up a lot of share in China, and now is the time for Apple in India,” he told the E-Commerce Times.

The decision by India’s telecommunications ministry is a speed bump for Apple, Moorhead said.

“This decision could delay Apple’s market-share ascension in India,” he said. “Used phones are a start, but ultimately, Apple wants to sell new phones, and I see it as a minor setback.”

Doomed to Single Digits

It’s a setback, though, that could continue to depress Apple’s share of the Indian market.

“With iPhone sales stalling in mature markets and economic uncertainty hindering Apple’s market efforts in China, marketing refurbished iPhones in India seemed like a solid strategy,” said Charles King, principal analyst at Pund-IT.

Allowing refurbished iPhones into the subcontinent could undermine the government’s Make In India policy.

“Unless the company finds a way to comply with the government’s Make In India program, Apple’s share of the market there seems likely to remain in low single digits,” King told the E-Commerce Times.

India isn’t Apple’s highest priority yet, but that could change, noted James Moar, a research analyst withJuniper Research.

“As the Chinese market slows, India becomes more attractive as a relatively affluent developing market,” he told the E-Commerce Times.

“It will likely become more important in the next few years,” Moar continued, “particularly as they are also one of the most receptive areas for iPad growth.”

Tarnishing the Brand

Without the ability to sell refurbished iPhones, Apple faces an uphill struggle to get midrange Indian consumers to buy into the iOS ecosystem, he maintained.

“This means that Apple either needs to produce phones specifically in India, for India, or accept that it cannot pursue the same ecosystem-centric strategy that it does elsewhere,” Moar said.

“The former strategy may result in good penetration of the Indian market, but without its ecosystem as a draw, Apple will have to compete on price to attract many consumers,” he continued.

“This may have the impact of tarnishing its brand elsewhere and may lead other developing markets where it doesn’t have much of a presence — such as Africa — to demand similar treatment, which will be a very costly investment for Apple,” Moar said.

If Indian regulators continue to be a barrier to Apple, the company could recalculate its developing world strategy.

“They could look westward to Africa and the Middle East, which are very fertile markets for connecting first-time users,” said Ramon T. Llamas, a mobile technology and trends analyst with IDC.

However, it will take awhile before those markets are ready for the iPhone, which is designed for faster networks. “There are places in Africa that are still getting their 3G legs. Going back to 3G would be an additional expense for Apple,” he told the E-Commerce Times.

More Pressure for a Home Run

With iPhone salessinking, the Indian setback adds to the pressure to make the next version of the iPhone a hit, noted Bob O’Donnell, chief analyst for Technalysis Research.

“There’s going to be huge pressure on the iPhone 7, and I’m not sure it’s going to be a knock-it-out-of-the- park product that’s going to make everybody upgrade,” he told the E-Commerce Times.

“We’re in a difficult time,” O’Donnell added. “I think the overall smartphone market has peaked, and Apple is suffering from that as much as anybody.”

Release of the iPhone 7 could be a make-or-break point for Apple, noted Jeff Fieldhack, research director forCounterpoint Technology Market Research.

“As important as India is, the need for Apple to persuade its users to upgrade to iPhone 7 is more important,” he told E-Commerce Times.

“Apple has such a strong ecosystem and such loyal followers, their business can be swayed tremendously by 1 or 2 percent of its installed base upgrading,” Fieldhack said.

“We have to wait until the 7 comes out to realize if we’re in a new norm and Apple has peaked or if it will continue to grow, ” he added, “They don’t have to hit a home run to get a big upgrade cycle on the 7. They just need to be solid.”

John Mello is a freelance technology writer and contributor to Chief Security Officer magazine. You can connect with him on Google+.

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