Now we know why Warren Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B) bought $1 billion in Apple Inc. (AAPL) stock during the selloff in February: The world’s biggest company has found another 1.3 billion customers.
Apple CEO Tim Cook is in India, where Bloomberg News reports he will announce plans for multiple retail flagships and a research facility to house the digital maps business. Already, AAPL has announced an apps development center in Bengaluru.
The plan is bold, as is the opportunity. India’s smartphone user base rose to 220 million people last year, surpassing the U.S. for the first time, according to Counterpoint Research.
Mr. Cook needs India. AAPL stock has fallen 30% from last year’s high and first quarter revenues fell for the first time in 13 years. Much-anticipated announcements regarding iTVs and iCars never surfaced. Instead we got the iWatch (or iFlop, if you listen to well-known VC investor Fred Wilson of Union Square Ventures).
As Mr. Cook goes west in search of growth, we suggest he keep going … west, east, north, and south.
Looking overseas, the combined populations of Apple’s Big Three (China, U.S. and Brazil) total 1.916 billion, but the remaining seven most populous countries in the world are home a staggering 2.402 billion people, and Apple isn’t even on the ground yet.
So in lieu of new gadgets and product refreshes, international expansion needs to become Apple’s new mantra. Here are four countries among the world’s 10 most populous that AAPL needs to conquer.
India
Samsung (SSNLF) is crushing Apple in India, with 26% market share of the smartphone market according to data from Counterpoint Research. In fact, Apple isn’t even in the top five. Its sales of roughly 2 million units during 2015 amounted to about 1% of India’s total smartphone market. Even after offering discounts of up to $500 on the 6 and 6E, Apple struggled to gain traction against local manufacturers.
This is why AAPL needs flagship stores on the ground and in front of people. It’s about engagement, which is why funding a local incubator for iOS developers is equally key.
Influence the future influencers. Win India.
Indonesia
Indonesia’s 260 million people make it the fourth most populous country in the world behind China, India and the U.S. Indonesia’s economy is the largest in Southeast Asia, and its GDP per capita ranks eighth in the world. Apple opened a corporate office in 2014, but it has no branded retail presence.
If there’s a stumbling block, it’s infrastructure. 3G technology is still the norm and only about a quarter of the population has a smartphone, but therein lies the opportunity. AAPL needs to partner with local telecoms to ramp up a shift to 4G, maybe even reach out to the government under Foreign Direct Investment programs.
Indonesia is a member of the G-20, and Apple should be doing business there. Think hearts, minds and infrastructure … plus 260 million people.
Brazil
As Mr. Cook goes west, we urge him to go south as well.
Brazil ranks fifth in the world by population with 210 million people, and while millions more will arrive this summer for the Olympics and World Cup, they’d better not drop their phones taking pictures. Brazil has only two retail stores, about one per 100 million people. By contrast, Apple operates 268 stores in the U.S. California alone has 54 stores, and Manhattan has seven … three of which are within walking distance of each other.
Android phones have captured nearly 80% of the smartphone market in Brazil, compared to Apple’s 12%. TechInsider compared prices for Apple products in Brazil versus the U.S., an suffice to say the 60% flat tax on imported goods probably explains the overwhelming popularity of locally made Android phones.
But here again it’s about hearts and minds. If any company can afford the lobbying, or in-country production facilities necessary to win local business, it’s AAPL.
Mexico
Apple announced plans in January to open four stores in 10th-ranked Mexico later this year — two in Mexico City and one each in Guadalajara and Monterrey.
Research from Statista pegs the number of smartphone users in Mexico at 42 million (about a third of the population) and forecasts an increase to 62 million over the next three years.
BlackRock, Inc. (BLK) CEO Larry Fink penned an article in 2014 imploring millennials to set up shop in Mexico:
“What sets Mexico apart is a combination of key factors for success: a diverse set of resources and industries, its proximity to the world’s largest economy, a relatively stable currency, and — critically — a proactive, democratic government … if I were starting my career, I’d try my luck in Mexico.”
Mr. Cook’s trip to India is not only important, it’s essential. If he wants to honor the legacy of Steve Jobs’ commitment to change the world, he needs to change the whole world.
Going to India this week is an important step. It could also prove highly profitable.
Adam Johnson is Founder and Author of Bullseye Brief, an investment newsletter that presents thematic and actionable ideas. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @AJInsight.
