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Apple Is Striking Gold With Older iPhones in India

India is the world's fastest-growing  smartphone market, but Apple (NASDAQ: AAPL) has failed to find significant traction there. The iPhone maker had set itself an ambitious target of selling 10 million smartphones in India during the fiscal year that ended in March, but apparently ended up far short as it reportedly managed to move just 2 million units.

Selling 10 million iPhones seemed improbable as India is a price-conscious market spoiled for choice by the smart distribution strategy  of Chinese phone makers that offer cutting-edge features at competitive prices. But it looks like Cupertino might have finally found a way to work into India's smartphone space by making its iPhones more affordable for the general public.

Image Source: Apple.

Older models, cheaper prices

According to Business Insider, Bloomberg estimates  that 80% of the smartphones sold in India are priced at $150 or below, so premium-priced Apple products are at a disadvantage. However, the lower prices of the iPhone 5S (launched in 2013) and iPhone SE (launched in 2016) make them more suitable for the Indian market.

Online retailers were selling  the iPhone 5S for as low as $248 (at the current exchange rate) last month while the newer and more capable iPhone SE is retailing  for around $340 (at the current exchange rate) on Flipkart.

By comparison, the cheapest  iPhone in the U.S. is the $399 iPhone SE, indicating that Apple is willing to alter its strategy for the Indian market. The older-generation iPhones accounted for 55% of the company's shipments in India last year, according to  Counterpoint Research data reported by Bloomberg Businessweek.

Apple is also retailing  the iPhone 6 for about $400 (at current exchange rates), while the iPhone 6S starts  at a price of $560, which means that it has got almost all the price points covered in this market. This strategy could bear fruit for Cupertino in the long run, along with other initiatives, as rivals such as Samsung have already been using an identical playbook in India.

Makes sense

Getting Indian consumers into the Apple ecosystem via lower-priced phones could pay off in the long run as those customers could buy more expensive devices in the future. This is exactly what rival Samsung is doing  in India and its strategy of focusing on different price points ranging from  entry-level to premium has pushed  it share of high-end smartphones sales to an estimated 48% in India. Not surprisingly, the Korean giant's latest Galaxy S8 flagship clocked  an impressive 80,000 pre-orders in just one week after launching on April 19.

In fact, Samsung's online store in India temporarily crashed as it reportedly saw 15 times more traffic than usual  after the S8 was launched, which is impressive considering the price-sensitive nature of this market.

Moreover, Apple's older and cheaper smartphone strategy for India should work in tandem with the company's other initiatives. For instance, the company has launched more than 100 franchised stores there and is contemplating a sizable retail expansion, while it has also started  manufacturing iPhones in the country to reduce costs.

Apple also plans to launch its India-specific online store by the end of the year, allowing the company to sell its made-in-India devices without  the requirement of any government approval that's required in the case of brick-and-mortar stores. This is another smart move given that the company gets around half of its iPhone sales in India from the online  channel as compared to the global industry average of just 30%.

It is clear that Apple is bringing together the different pieces that are required to succeed in India in the long run.

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Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.