Can India become a new China for Apple? - Bernstein
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Strong quarterly results for Apple (NASDAQ:AAPL) have recently made emerging markets a bigger focus for the tech giant's investors, Bernstein says in a new look at the company's progress in emerging markets (and the India opportunity in particular).
As a percentage of total revenues over the past decade, Apple's emerging-markets sales have been fairly flat, analyst Toni Sacconaghi Jr. noted -- and particularly if you compare it to other consumer/luxury brands, the percentage looks "middle of the pack, and accordingly does not point to any obvious structural underpenetration."
IPhone market share tends to correlate with overall consumer spending power, Bernstein found, which indicates that Apple should grow share in emerging economies as consumer wallets expand.
India made up about 2.5% of iPhones sold, Sacconaghi and Bernstein estimated, and some 1.5%-2% of total company revenues. With strong economic growth, that's set to turn into 20% annual growth over the next five years, amounting to another 70 basis points in company growth per year.
"The bull case -- of course -- is that India becomes the next China for Apple," Sacconaghi said. "If so, our analysis suggests that India could grow 40%-plus annually and add 200 bps-plus to annual iPhone unit growth and company revenue growth over the next five years."
But he's skeptical that the India growth path will follow that of China -- which has been "disproportionately important to Apple" (and to premium brands more generally) even beyond the GDP growth story. And economists are careful to note that it may be harder for India to reach the sustained 7-9% economic growth that China pulled off, for reasons including a less centrally planned economy, accompanying low manufacturing jobs, and low female employment (24% vs. China's 61%).
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