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Apple Inc. (AAPL) to Consolidate Smartphone Position India via Refurbished iPhones

Apple Inc (AAPL) iPhone

Apple Inc. is keen to sell refurbished iPhones in India in order to consolidate its position in the smartphone market. The firm has reportedly sought the Indian government’s approval to ‘import and sell its certified pre-owned iPhones in India; manufacture and sell its certified pre-owned iPhones in India,’ according to its application on December 7. It also plans to establish a facility in the country to refurbish iPhones shipped from China. The company has already applied for official government permission for the launch of its first flagship branded retail store in India.

Apple Inc (AAPL) iPhone

Apple’s strategy- good business plan or more e-waste for India?

Apple Inc.  reported total iPhone sales at 74.8mn for Q1 ended December 26 2015. Deliveries in the Indian market increased the most by 76%, compared with 45% in Korea, the Middle East and Africa, 20% in several western European countries and 18% in mainland China. The firm also forecast a drop in revenue for Q2 for the first time in 13 years. The fact that nearly two-thirds of Apple Inc.’s revenue is now generated from markets outside of the US and the ongoing slowdown in China, it is evident that the firm intends to take Indian markets more seriously.

Apple Inc. CEO Tim Cook has indicated in the earnings call that the firm plans to invest long-term in India. ‘India is incredibly exciting. It is one of the fastest growing economies, and is also the third largest smartphone market in the world, after China and US. In India, the median age for the population is 27, in China that’s nearly 36 years. I see the demographics there being incredibly great for a consumer brand, and for people that really want the best product,’ said Cook.

However, skeptics feel that the California-based technology giant uses India as a market to get rid off its older products. It has happened more than once in the past that Apple Inc. , while launching its latest iPhone model e.g. the iPhone 5 or iPhone 5s at exorbitant prices, subsequently offers another older model (iPhone 4 versions) at a slightly lower market price. Such phones are usually relaunched with hardware that is almost 5 years old and have to be discarded after one or two year of use, leading to heaps of electronic waste in the country.

The Indian Environment Ministry’s Technical Review Committee on July 2, 2015 rejected a similar proposal by the company. Apple Inc. had applied to import 100,000 used iPhones and 250,000 iPads in order to explore ‘India’s refurbished electrical and electronic equipment’ market. However, the committee turned down the application, stating that the refurbished devices had shorter functional life and became obsolete quicker, thus adding to the country’s e-waste burden.

Durable phones will help lower e-waste, contends Apple

In the new filings, Apple Inc. contends that its refurbished devices are good quality ones, with the company maintaining high standards of e-waste management and recycling. It says that the Certified Pre-Owned (CPOs) units cannot be technically considered ‘second hand’ as the units will be sold through official channels, face quality checks and come with a standard one year warranty- which is available with a newer device.

According to the firm, use of CPOs, which it claims are as durable as new iPhones, price-conscious consumers in India can replace their low-end mobiles, including smartphones, and prevent e-waste generation and landfills. ‘Indeed, the presence of low-end mobile phones constitutes a risk for the environment given their current levels of quality and durability. Apple designs durable products that last for many years. Designing durable mobile phones helps reduce electronic waste,’ said Apple Inc. in its filing.

The firm did not provide details of its business plan or targets, but mentioned that the quantity of the devices to be imported would vary from hundreds of thousands of units on an annual basis. For the production of CPO units, Apple Inc. says that the ‘initial scope would be in low hundreds of thousands units on a yearly basis’.

‘This also depends on other external factors such as the number and availability of defective units coming from China, China’s regulation on exporting defective units and the economics of CPO manufacturing in India. After approval from the government of India, such a project could be established, with all factors falling in place, within a period of 24 months,’ the firm added.

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