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Why Apple Is Having So Much Trouble in India

August 5, 2016, 1:33 PM UTC
India Apple
Cook, center, interacts with Anant Ambani, left, son of industrialist Mukesh Ambani, outside Siddhivinayak Hindu Temple in Mumbai, India, Wednesday, May 18, 2016. Apple India head Sanjay Kaul is on right. Apple will set up an app design and development center in southern India, the company announced Wednesday, shortly after company chief Tim Cook arrived in the country on his first visit. (Press Trust of India via AP)
Press Trust of India via AP

With iPhone sales shrinking this year for the first time ever, Apple CEO Tim Cook has set his sights on India for future growth. According to the latest market research out of the world’s third-largest phone market, Cook should have plenty of room to boost sales.

Apple accounted for only 800,000 of the 30.7 million smartphones shipped to India in the second quarter, Strategy Analytics reported. That represented a 33% drop from a year earlier for Apple even as the overall market increased 19%.

That cut Apple’s market share in half, to 2% from 4%, noted Woody Oh, director at Strategy Analytics. “Apple iOS will need to reduce iPhone pricing to cheaper levels, attract more operator subsidies and enlarge its retail presence through Apple stores or online channels if it wants to regrow significantly in the future,” he said in the report.

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At the opposite end of the spectrum, phones running Google’s (GOOGL) Android software dominated the market—in large measure because they sell at much lower prices than the iPhone. Android phones accounted for 97% of second quarter sales, up from 90% a year earlier, Strategy Analytics cited.

Cook has repeatedly highlighted India as the richest opportunity for Apple (AAPL) in the future, especially as its sales in China and the U.S.—the two largest phone markets—have faltered.

“We just announced a first of its kind design and development accelerator to support Indian developers creating innovative applications for iOS and we opened a new office in Hyderabad to accelerate maps development,” Cook told analysts during Apple’s quarterly earnings call last month. “We’re looking forward to opening retail stores in India down the road, and we see huge potential for that vibrant country.”

Seemingly in conflict with the Strategy Analytics report, Cook also said that sales in India experienced double-digit sales growth in the quarter. That could be due to Apple products other than the iPhone or because iPhone average selling prices increased even as units sold declined.

For more on Apple’s problems in India, watch:

It could also reflect a decrease in shipments, which is what the market research firm tracks versus actual sales to consumers. Globally, Apple reduced the inventory of iPhones in stores by over four million units. That means Apple reduced its shipments even as sales may have increased in some regions.

Apple has faced a variety of challenges in India. Not only are its phones more expensive than those of competitors, but it offers limited versions of many of its popular services there. The iTunes store doesn’t sell TV shows, its maps app doesn’t have directions or navigation, and Apple Pay isn’t available at all. Apple faced lengthy delays before it was allowed to open its own stores in India, and its plan to sell used phones at lower prices was blocked in May.

So Cook’s Indian dream is still attainable, but it doesn’t look close to fruition yet.