Here are the challenges Apple’s Tim Cook faces on his India trip

Apple chief facing challenges on India trip
Apple chief facing challenges on India trip

Tim Cook's Asian tour continues with his arrival in India's high-tech capital Mumbai. But will the Apple chief executive's trip hit the same highs as his company's $1 billion investment in China?

After landing in Mumbai late Tuesday night, Apple CEO Tim Cook has already packed in a visit to the city's famous Shree Siddhivinayak Temple before filling his diary with a string of meetings with CEOs of telecom giants such as Reliance and Bharti Airtel, other industry leaders and a tete-a-tete with Indian Prime Minister Narendra Modi over the weekend.

Apple chief executive Tim Cook leaves the Taj Mahal Palace hotel in Mumbai
Punit Paranjpe | AFP | Getty Images

During his first full day in India, the Apple CEO opened an iOS developer center in Bangalore to help support and develop app makers. This follows hot on the heels of the announcement of Apple's $1 billion investment in in Didi Chuxing, an Uber competitor.

However, analysts believe Apple might have its work cut out in India. The company run afoul of Indian regulators earlier this month, when it had its application to sell refurbished iPhones rejected there. While analysts have pointed to Apple's troublesome time in India as one of the reasons for Cook to visit India, some others think it is a way for Apple to understand the fastest growing smartphone market in India.

"One of the objectives of Tim Cook's visit will be to better understand the dynamics of the Indian mobile phone market, considering India has been a growth story for Apple," Navkendar Singh, a senior research manager at the International Data Corporation's (IDC) told CNBC.

He added that Cook will also be engaging with telecoms service providers for 4G roll out discussions and startup opportunities.

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"Also on the agenda is engaging with the government considering they have had their application turned down, for allowing to sell refurbished iPhones in India and pending application for opening fully owned Apple stores in India. So, it is really a multidimensional visit."

Apple requested to sell refurbished, cheaper phones in India, a request the government there rejected. The decision was a major setback for Apple that is looking to tap into the Indian market.

"Refurbished iPhones would have certainly given an opportunity to many aspirants to experience the Apple ecosystem without spending extravagantly and allow Apple to capture share in the price conscious market where 85 percent of smartphones sold are under $200," IDC's Singh told CNBC, adding that Apple enjoys huge aspirational brand value among Indian smartphone consumers. He says the market sometimes has seen a spike in sales of previous generation iPhones due to price cuts. "This helps in converting the aspirations of many consumers into purchase since it falls in their budget."

Apple faces tough competition in India against Samsung and Micromax thanks to their lower-priced smartphones. According to the IDC Quarterly Mobile Phone Tracker, 23.5 million units of smartphones were shipped in India in Q1 2016 registering 5.2 percent growth over the same period last year. However, smartphone shipments shrank by 8.2 percent over Q4 2015, dipping consecutively for two quarters.

In an interview on CNBC's Mad Money with Jim Cramer earlier this month, Apple's Cook said India today has 50 percent of their population of 25 years of age or younger who want smartphones.

"It's a very young country. People really want smartphones there, really want smartphones. And this year, the first year, LTE begins to roll out. And so many of your viewers here in the United States, they're used to using LTE and streaming video. And hopefully they're getting a good experience there. In India you can't do that long – there is no LTE. And so that's changing. Huge market potential."

After a setback in its first-quarter results that showed the company's iPhone unit sales fell 16 percent year-on-year and a 26 percent fall in revenues from China, one of Apple's biggest markets, the company's leaders have resorted to charm offensive with its regional markets.

According to numbers from Counterpoint Research, a market intelligence firm, Apple sold nearly 2 million iPhones in India in 2015 and is likely to touch 3 million in 2016. Apple iPhone 5S contributed to 50 percent of the total sales in Q1 2016 which suggests that Apple's strategy in India is to discount its previous flagship handsets and position them as affordable.

Chai with PM Modi?

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A big focus of Cook's trip will be meeting with Modi. The two have met earlier during the Indian Prime Minister's visit to the Silicon Valley last year as part of the government's "Make in India" campaign focusing on improving the manufacturing sector.

While this trip is crucial for Cook, he is not the first tech leader to visit India and woo the government. In the past two years, CEOs of tech giants such as Facebook, Alibaba, Google, Microsoft and Amazon have all made their way to India to meet PM Modi and tap into the young and growing Indian market.

Although it is not very clear what is on the agenda for this meeting, telecom analysts have said Cook, like a number of other tech CEOs, will try and charm Modi as a way to access one of the world's fastest growing tech markets.

"PM Modi will be pushing for his 'Make in India' agenda and wanting to attract investment," Anuj Khanna, a mobile fintech expert and CEO of Peak State Consulting told CNBC. "Tim Cook will be looking at getting reassurance and support from PM Modi. I assume there should be some announcements of increased investment by Apple in India and also commitment to create more jobs in the Indian tech sector."

Some others expect Cook to bring up the issue of the refurbished phones.

"I think the discussion will revolve around the huge potential of the Indian mobile phone market, including how Apple wants to appeal to first time users hence the application for lower priced refurbished I phones. Possible discussion point can also be around "Make in India" or "Assembled in India" for Apple and its intent to open fully owned Apple stores in India," IDC's Singh told CNBC.