After having spent a lot of time and effort in trying to penetrate China over the last 3 years, analysts at Credit Suisse are now seeing signs that Apple Inc. (NASDAQ:AAPL) is increasing its focus towards the Indian market. In fact, Greater China now accounts for 13% of Apple’s group revenues (including retail) with sales of $7.3bn up over 60% yoy, as Apple has partnered with two out of three carriers in the region (China Unicom and China Telecom) for its iPhone and also expanded its retail store presence in the region (from 1 in March 2009 to 8 currently excluding 3 stores in Hong Kong).

Apple Inc. (NASDAQ:AAPL) still has only around 1.5% smartphone share in India. According to Gartner data, iPhone’s market share in India was mere 1.5% in 9M2012 as opposed to its global share of 18% and 11-12% share in China for 9M2012. Meanwhile, Samsung has managed to increase its smartphone share in India from around 15% in Q111 to over 40% most recently driven by the success of range of Galaxy smartphones.

Apple smartphone market share in India
3-4 fold growth in device volumes recently

Since the launch of iPhone 5 and recent changes in Apple’s strategy in India, there have been a number of data points which suggest that iPhone volumes in India have seen 3-4x increase in calendar Q412 compared to the previous quarter. Here one should note the following:

According to market research firm IDC, sales of Apple devices have seen an increase of 3-4x over the last 3 months primarily driven by iPhone volumes.

As per research firm Canalys, Apple’s iPhone shipments in India in calendar Q412 have grown around 3x compared to the previous quarter.

At the recent Asymco conference in California, IBM VP Paul Brody noted that mobile carriers are activating 2,000 iPhones per day in India.

Partnering with distributors for an open distribution model

Till now Apple Inc. (NASDAQ:AAPL) had been focused on partnering with telecom operators in India (Bharti Airtel and Aircel as its preferred partner) to drive iPhone sales but this has had limited impact on iPhone’s market share in India. This strategy was similar to what Apple had adopted in most other markets like US and parts of Europe, whereby it relied heavily on carriers to subsidize the iPhone models and promote them. However, with the recent launch of iPhone 5 in India in Nov 2012, Apple Inc. (NASDAQ:AAPL) appointed Ingram Micro and Redington as distributors for iPhones (iPhone 5, iPhone 4S and iPhone 4 models), which marks a major shift in Apple’s distribution strategy in India.

Also building its own presence in India

In addition to expanding its distribution strategy, Apple has also decided to beef up its sales presence in the country. In fact, press reports, Apple Inc. (NASDAQ:AAPL) now has over 150 employees in India, up from only around 30 people 2-3 quarters back.

According to Focus on advertising and interest free installments for iPhone

Apart from expanding its sales force and distribution network in India, Apple Inc. (NASDAQ:AAPL) is also focusing on advertising campaigns along with combined efforts from its distribution partners). In fact, Redington (one of its distribution partners) noted that Apple Inc. (NASDAQ:AAPL) had reimbursed it the cost of a full-page newspaper advertisement through higher margin on iPhones. One of the main issues with iPhone adoption in India has been related to the high cost of the iPhone models. For example, the iPhone 5 (16GB version) in India costs INR 45,500 to a customer (equivalent to $850), and with no or limited carrier subsidy available to consumers, this makes the iPhone quite expensive in terms of affordability.

Comparing this to the US market, the iPhone 5 (16GB) is available to consumers at an upfront payment of $199 when bundled with a 2-year monthly data plan. Given this major difference in the smartphone market in India as opposed to developed markets, Apple Inc. (NASDAQ:AAPL) in partnership with its retailers has recently introduced a new business model whereby customers in India can buy iPhones on interest free installments. For example, a consumer can buy an iPhone for INR 16,990 (or $320) and pay the remainder in 6 or 12 installments, thereby making it more affordable.

iTunes Music Store also recently launched in India

During calendar Q412, Apple increased the footprint of its iTunes Music Store whereby it added 56 countries including
India, Russia, Turkey and South Africa to its list, thereby making its music services now available in around 119 countries.