Apple turns to India as Chinese market weakens

As red-hot sales in China show signs of cooling, Apple Inc executives are touting India’s growing appetite for iPhones.

In an earnings call in which the company reported meager iPhone growth and forecast its first revenue drop in 13 years, the Indian market stood out as a rare bright spot for Apple.

Sales of the company’s flagship smartphone climbed 76% in the country from the year-ago quarter, Apple CFO Luca Maestri said on the call.

And Apple CEO Tim Cook suggested more growth is on the horizon, noting the median age in India is just 27.

“I see the demographics there also being incredibly great for a consumer brand, and for people that really want the best product,” Cook said. “We have been putting increasingly more energy in India.”

Growth in India is a tantalizing prospect as Apple grapples with the economic downturn in China, its second largest market. While revenue in Greater China rose 14% in the last quarter, Apple is beginning to see a shift in the economy, particularly in Hong Kong, Maestri told Reuters in an interview.

India cannot immediately offset Apple’s woes in China, said analyst Neil Shah of Counterpoint Technology Market Research. The company averaged only about 450,000 smartphone shipments per quarter in India in 2015, compared with more than 15 million per quarter in China, Shah said.

What’s more, nearly 70% of smartphones sell for less than $150, leaving just a sliver of the market for Apple’s high-end phones. The company’s smartphone market share stands at less than 2%, Shah said.

But the Indian market seems to be turning in Apple’s favor. With 4G coverage spreading, Indian consumers will likely be more open to investing in smartphones, Shah said.

Young consumers are already willing to spend heavily on the device at the center of their digital lives. As in China, Apple products are coveted status symbols.

“The love for the iPhone is there,” said Carolina Milanesi, chief of research and head of US business at Kantar Worldpanel ComTech, a consumer research firm.

Apple’s next task is expanding distribution in India, where its products are sold through third-party resellers. The company has filed an application with India’s Department of Industrial Policy and Promotion to open its own stores, an Indian official told Reuters earlier this month.