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Apple AAPL has had a number of demands of Indian regulators which haven’t made any adjustments for the company. As a result, its share of the Indian smartphone market is a mere 1%, where Chinese company Xiaomi leads with 31%, followed by Samsung with 25%, Oppo with 9% and Vivo 7%. The rest of the market is fragmented according to data provided by Canalys.
The Indian government requires 30% local inputs for phone makers that want to open their own retail outlets and Apple has demanded tax breaks, duty-free imports and other perks, without which it says its phones exported from India won’t be competitive. Apple is basically focused on a level of profit that likely won’t be possible in India, especially since other players aren’t making the same demands. Samsung has already inaugurated a huge export hub near Delhi and Xiaomi has announced a $200 million investment for a facility in Southern India. Apple assembles outdated low end phones in the country. The government slaps a 40% duty on its imported iPhone Xs.
Apple distributors have heavily discounted its products, a practice the company discourages to protect its brand value. So after reducing the number of distribution partners to two, it is taking other measures to improve the financing and overall customer experience.
But that isn’t the end of its problems. The Indian government wants Apple and other smartphone vendors to install a government app called Do Not Disturb (DND) that is designed to help it deal with the large number of spam calls and messages that users typically receive. The government’s app makes it easier for users to report such communications.
While other handset vendors including Alphabet GOOGL are already in compliance, Apple indicated that the app exposes its customers’ data to third parties by allowing fully automatic spam filtering without user intervention and thereby posing a threat to their privacy and security. In a letter to the TRAI this June, it said that changes to its own iOS 12 would allow developers to create an app extension that can help users report unsolicited communication, after they enable an Unwanted Communication extension in the Settings app.
The Telecom Regulation Authority of India (TRAI) isn’t taking Apple’s approach well. TRAI Chairman R.S. Sharma has said, "Unnecessarily, people are given an impression that our app is asking for wholesale permission to access contacts and call logs.”
The TRAI has also issued a notification to Indian telecom companies that it could give them six months to "derecognize" from their networks devices that don’t support anti-spam apps approved by the government.
He also said that a letter wouldn’t help challenge the notification and that “The most appropriate way to challenge this is in court.”
Apple shares carry a Zacks Rank #2 (Buy). Other companies worth buying are Entegris ENTG, Lattice Semiconductor LSCC or Microsoft Corporation MSFT. Or check out the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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