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How Apple lost bite as India rang in profits for Chinese smartphone makers

Agencies

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New Delhi, Nov 7: Software engineer Samee Alam was ready to take the big leap and buy an iPhone in this week’s Diwali festival sales, but at the last minute he opted for cheaper Chinese competitor OnePlus instead.

Alam, 27, spends hours on his phone watching shows, surfing and shopping, making him the perfect target for Apple Inc as it strives to raise sales among India’s 1.3 billion consumers.

But in a country where the average per capita income is around $2,000 a year, even the cheapest of this year’s new iPhones, the XR at 76,900 rupees ($1,058), costs twice as much as many of the alternatives.

 

Hong Kong-based Counterpoint Research says that iPhone sales are falling as a result. From three million phones in 2017, sales may sink to two million this year, according to their estimate, the first decline in four years.

More than half of those sales will come from cheaper older models, and the lack of progress in India was among problems cited by Chief Executive Officer Tim Cook when he gave a disappointing holiday outlook last week.

Even in the premium segment, smartphones that cost more than $400, Apple lagged Samsung and China’s OnePlus in the third quarter.

“I have never used an iPhone and I was keen on getting my hands on one but it didn’t make sense,” says Alam, who works for one of the raft of firms to have invested in the southern city of Bengaluru, often called India’s Silicon Valley.

“I look for storage, camera and processor in phones and cheaper alternatives like OnePlus are more value for the money.

The new iPhones cost almost 100,000 rupees – I can get three good phones for that price or even a decent gaming laptop.” Solid Mac sales and the high unit price of iPhones meant Apple’s total revenue of $2 billion in India last year was still double that of OnePlus, which only sells mobile phones. But Counterpoint’s data says that gap will also shrink.

OnePlus’ India head Vikas Agarwal told Reuters this week that 10-15 percent of new customers in recent months have been defectors from Apple, suggesting even some loyalists are opting out of upgrading their handsets.

Apple’s problems go beyond price.

The company, facing down a handful of regulatory headaches, lost some of its top executives in India at the start of this year.

An Apple spokesman said the departures had nothing to do with the company’s performance, but people familiar with the matter told Reuters that the departures were likely linked to the company changing its distribution system. Apple has cut the number of distributors in the country to two from five.

The sources, who declined to be identified because they have business relationships with Apple, also said company veteran Michel Columb is still working on solidifying business relations since taking control of the Indian operation in December.

Apple declined to comment further.

Prime Minister Narendra Modi’s government has sought to drive electronics producers into manufacturing locally by steadily moving tariffs up the supply chain from simple phone cases to sophisticated chipsets and boards.

Along with local firms like Lava, global smartphone giants including Samsung Electronics Co Ltd, Oppo and Xiaomi Corp have responded aggressively, investing millions of dollars in plants around Bengaluru and Delhi tech hub Noida.

Apple is the only major player which does not manufacture phones in the country and it only assembles two low-cost older models through Wistron Corp in Bengaluru.

Industry experts say as a result the company still imports about 70-80 percent of its phones. That results in high import duties, which in turn make the phones expensive.

In the United States, the basic iPhone XR model costs $749 or roughly 54,400 rupees, only two thirds of its retail price in India. Beyond that, while U.S. phones are subsidized under deals with wireless carriers, Apple’s phones in India are not.

“Apple doesn’t have enough confidence … in the Indian manufacturing system right now, to set up plants and move some of the manufacturing out of China,” said analyst Navkendar Singh of tech consulting firm IDC.

“In the process they are losing around 15-20 percent of their tax incentive … which they could have passed on to the consumer.”

Diwali, the Festival of Lights, is peak selling time for electronics in India, but the Apple-licensed store in one of Bengaluru’s big shopping malls was deserted this past Saturday.

“Features of the emerging phones are very similar to an iPhone,” says salesman Aejaz Ahmed, adding volumes have fallen in the past few months. “It is very difficult to make out the difference from a distance because they even look so alike.” Sales staff at several stores in Bengaluru and nearby Chennai pointed to the launch this year of the latest OnePlus phone as a major problem for the U.S. phonemaker. At 37,999 rupees, the Chinese company’s 6T is half the price of the XR.

The result, says Neil Shah, from Counterpoint, is that Apple’s user base in India is set to decline about 10 percent to nine million users this year. That compares to an estimated 436 million Android users.

“If your user base is declining, you are losing grip on the market,” he says. “The new customer base is not coming.” (Reuters)


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ADB cuts India’s FY20 GDP growth forecast to 7% on fiscal shortfall worries

Press Trust of India

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New Delhi: Asian Development Bank on Thursday lowered India’s GDP growth forecast to 7 per cent for the current year on the back of fiscal shortfall concerns.

“India is expected to grow by 7 per cent in 2019 (FY20) and 7.2 per cent in 2020 (FY21), slightly slower than projected in April because the fiscal 2018 outturn fell short,” ADB said in its supplement to the Asian Development Outlook 2019.

For the south Asian region, ADB said the outlook remains robust, with growth projected at 6.6 per cent in 2019 and 6.7 per cent in 2020.

 

Earlier in April this year too, the Manila-based multi-lateral funding agency had lowered India’s growth forecast for FY20 to 7.2 per cent from 7.6 per cent estimated previously due to moderation in global demand and likely shortfall in revenue on the domestic front.

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Jalan panel proposes ‘nominal’ transfer of RBI funds to govt over 3-5 years

Agencies

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New Delhi: The Union government may not get the windfall gain it was expecting from the Reserve Bank of India (RBI) reserves as the Bimal Jalan committee, tasked with reviewing the central bank’s economic capital framework, has proposed a “nominal” transfer of surplus to the central government in a phased manner, according to a source in the know.

“The report has proposed a formula for a nominal transfer of a portion of the RBI’s reserves to the central government in a period of three-five years. This is in line with the current practice being followed by the RBI for transferring dividend annually,” a person close to the development said.

The person said the panel members might “not be unanimous” on the suggestions the committee made. These will be submitted to RBI Governor Shaktikanta Das “in a few days”. The RBI’s central board, headed by Das, will take up the matter.

 

The report would likely include a dissent note by Finance Secretary Subhash Chandra Garg, who is the government’s representative on the panel.

The committee has recommended a periodic review of the RBI’s economic capital framework, according to the source.

Initially, the finance ministry had expected around Rs 3 trillion from the RBI’s reserve funds, which were at the heart of a conflict between the regulator and the government last year.

On the insistence of the finance ministry, the central board of the RBI formed a six-member committee — headed by Jalan and co-chaired by former RBI deputy governor Rakesh Mohan — in December to review the central bank’s economic capital framework.

The main difference of opinion within the panel was over transferring the RBI’s “excess” capital reserves. While most panel members are in favour of a phased transfer of the RBI’s capital reserves to the government over the years, the government’s view, voiced by Garg, was for a one-time transfer.

For this financial year, the government had accounted for around Rs 20,000 crore as “additional dividend” from the RBI, a finance ministry official said. This, the official said, is unlikely to happen.

In the Receipts Budget, allocation towards the “dividend or surplus of RBI, nationalised banks and financial institutions” was increased by Rs 23,130 crore to Rs 1.06 trillion in 2019-20, compared to the Interim Budget.

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Nod to bankruptcy code changes, will help home buyers

Agencies

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New Delhi: The government today gave its approval to seven amendments to the Insolvency and Bankruptcy Code (IBC), a move that will benefit unsecured creditors like home buyers in a big way.

Minister for Information and Broadcasting Prakash Javadekar said, the IBC (Amendment) Bill, 2019, would be introduced in Parliament during this session and will have retrospective effect. An official statement read: “The amendments aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code.”

of all financial creditors, including unsecured ones (home buyers) covered under Section 21 (6A) “shall be cast in accordance with the decision approved by the highest voting share (more than 50 per cent) of financial creditors on present and voting basis”, it said. It also said greater emphasis had been given “on the need for time-bound disposal at application stage and a deadline for completion of CSRP within an overall limit of 330 days, including litigation and other judicial processes”. Experts say this provision will help unsecured creditors (mostly home buyers) in a big way.

 
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