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Apple applies to open own-brand stores in India

As the smartphone market in China slows, Apple has taken a big step towards expanding its presence in India by applying for official government permission to launch its first flagship branded retail store there.

The move underlines a broader search for new growth markets for Apple, at a time when some Wall Street analysts predict that iPhone sales could fall this year, for the first time in the company's history.

The world's most valuable business by market capitalisation has steadily increased its operations in India over recent years, but the long-awaited decision to open a retail store is likely to be viewed as a clear statement that Apple plans to expand more aggressively in the fast-growing Asian market.

Apple confirmed that it had filed an application to India's department of industrial policy and promotion, which, if accepted, would allow it to open its first solo branded retail outlet.

Until recently, Apple's relatively expensive iPhones have struggled to compete in India's cost-conscious electronics market, winning a reputation as a prized status symbol among affluent buyers, but at prices beyond the reach of ordinary consumers.

In the longer-term, however, Apple views India as the most likely replacement for the booming sales in China that have powered its rise over recent years. Analysts say smartphone sales in China are levelling off, as are those in industrial economies.

Apple Stores are consistently rated as the most profitable on the high street, on a revenue-per-square-foot basis. Angela Ahrendts, who left Burberry to lead Apple's retail unit in 2014, has been working with design chief Sir Jonathan Ive on a redesign of the stores, in a bid to push them even further upmarket.

Apple's move comes just two months after New Delhi eased tough local sourcing requirements for foreign-owned retail stores, which will give companies a longer window to set up an Indian supply chain.

Previously, India required foreign-owned shops in India to source 30 per cent of their wares locally within three years of their initial investment.

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India's smartphone sector boomed during 2015, becoming the world's fastest-growing market for the devices. Roughly 250m Indians own smartphones — a level that is expected to double by 2018, according to industry estimates.

Apple responded by bolstering its marketing efforts and shaking up its distribution network last year. The company also launched a major advertising campaign for its iPhone 6S last October, which it sold mostly via online retailers and neighbourhood phone stores.

Although the company has until now viewed India's market as too small and complex to sustain its high-end stores, it has experimented with a few "store-in-store" mini-shops, in partnership with local retailers.

The application is also likely to raise speculation that Apple may soon begin to manufacture smartphones in India. Foxconn, the Taiwanese contract manufacturer that makes most iPhones, announced plans to set up an array of new factories in India last year.

In China, Apple is midway through an aggressive expansion drive, with plans to open about 40 Chinese branded retail stores by the end of this year.

Any plans for a similar push in India face a number of obstacles. Premium retailers in India often struggle to find appropriate locations for their stores, and must grapple with a range of awkward rules, including requirements to source some products locally, rather than importing from abroad.

"Apple was rather cold to India until about three or four years ago, but they are trying hard to catch up," said Arvind Singhal, chairman of Technopak, a retail consulting group.

"Opening stores is a good strategy to boost the Apple brand and experience in India, although it may be that the stores are tricky to open and end up making operating losses for a while."

Apple declined to provide details on the timeframe for its plans, or the size of its investments in India. News of its application was first reported in the Economic Times, an Indian business newspaper.

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