Apple's Cook tours India in critical moment for iPhones

NEW DEHLI — Tim Cook is in the midst of what may be his most important business trip since he became Apple CEO nearly five years ago.

In the first visit by an Apple CEO to India, Cook met Indian Prime Minister Narendra Modi on Saturday. He's already rubbed shoulders with Bollywood stars, financial and tech leaders and consumers.

“(Cook) spoke of the possibilities of manufacturing and retailing in India,” according to a statement issued by Modi's office after the meeting. “He appreciated the breadth of young talent in India, and said the youth have significant skills which Apple would like to tap. He mentioned the immense potential for ‘app development’ that exists in the country.”

Apple had no announcement on whether it will open stores in India this year, a goal of Cook's.

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The week-long journey, which started in China, had the air of a diplomatic mission to burnish Apple's investment and commitment to two countries vital to its success, Apple watchers say. But while slowing demand for iPhones in China, Apple's second-biggest market, has put the brakes on Apple's growth, the India market is seen ready to inject new momentum to the world's most valuable company.

“North America and China are Apple’s largest markets, and both have slowed down significantly in the last year. They have reached a saturation point," said Niel Shah, an analyst at Counterpoint.

"India, on the other hand, is the fastest-growing market in the world for smartphones. The fact is that for the company, it’s the perfect time to look seriously at the Indian market because there’s nowhere else left to go,” Shah said.

In Hyderabad, Cook opened a technology center that will focus on developing maps for its iPhone, iPad, Mac and Apple Watch. Apple said the initiative would create 4,000 jobs.

"The talent here in the local area is incredible, and we are looking forward to expanding our relationships and introducing more universities and partners to our platforms as we scale our operations,” Cook said Thursday in that southern India city.

He also met with officials from ICICI Bank, India's largest private lender.

The Cupertino, Calif., is intensifying its focus on the Asian countries because business at home has cooled after a torrid decade of growth. Sales in the recently completed quarter marked the first year-over-year decline in more than a decade. Shipments of iPhone plummeted 16%, the first drop in the product's 10-year history. Google Chromebook sales surpassed Macintosh for the first time in the U.S. recently, Google CEO Sundar Pichai said in a tweet Thursday.

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"It is critically important" Apple show it is investing in both countries and not merely selling products to them, said Thomas Cooke, a professor at Georgetown McDonough School of Business. "Apple needs to show it is interested, and Cook's trip demonstrated that."

Cook landed in China shortly after Apple plowed $1 billion in Didi, China's leading ride-hailing service. It is Apple's largest known investment in a tech company.

Apple rivals Facebook, Google, Amazon and Microsoft have made nice with government leaders of India and China in recent months, mindful of their burgeoning, and highly coveted, demographics. Half of India's 1.25 billion residents are under 25 years old, the "ideal customer fit" for Apple, Georgetown's Cooke said.

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Apple has built a $59 billion business in China, its second-largest market, where four of the top-five selling smartphones are iPhones. But it is in India, with annual sales of $1.5 billion, where Cook & Co. see the most potential. "We see India where China was 10 years ago," he told Apple shareholders in February. Indeed, iPhone sales in India soared 56% in the recently completed quarter.

Apple has "golden status in China and there is tremendous opportunity in India," said Tim Bajarin, founder of Creative Strategies. He said a dedicated product in the India market could be a game changer.

Apple has made no secret of its grand plans for the two most-populous countries in the world, but it won't be easy.

Sales in China slumped 11% in the first three months of this year, a reflection of a slackening smartphone market and a wobbly economy. Such concerns prompted at least one major Apple investor, Carl Icahn, to dump nearly 50 million shares. (Billionaire investor Warren Buffett's Berkshire Hathaway group, on the other hand, gobbled up $900 million in Apple stock.)

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But Silicon Valley analyst Jack Gold expects Apple and other makers of high-end smartphones will sell “significantly reduced numbers” in India than in China because of lower network capabilities, lower median household income and a high-penetration of Android phones in India.

Gold estimates Apple sold about 20 million smartphones in China in the last quarter of 2015. India, he said, accounted for about 11 million in the same time. “That’s a significant amount, but not sufficient to make up for all the market downside Apple is seeing in China and other parts of the world,” he said.

In India, authorities this month rejected Apple's request to import and sell refurbished iPhones amid protests from handset vendors, who argued the move would flood the market with used electronics and undercut a government push to ramp up local manufacturing. Apple, which has a 1% slice of the smartphone market in India, had hoped to increase its market share through the sale of lower-priced iPhones to cost-conscious consumers.

In India, Cook said refurbished iPhones are better than most models and have full service support from Apple.

Even with a faster network, the iPhone is too expensive for the typical Indian — most buy smartphones that costs $150 or less. Apple’s entry-level phone in India, the iPhone SE, sells for $550, a price that may drop once Apple’s partner, Foxxcon, begins manufacturing the iPhone and other Apple products in India. Plans already are underway to build a plant in the state of Maharashtra.

Modi, a business-friendly leader who has promised to spur India's economy, has been courting tech companies like Apple, Facebook and Google to set up shop in India with promises to make India's laws and regulations more hospitable to foreign investment.

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Gahlot reported from New Dehli, Swartz from San Francisco.

Follow USA TODAY San Francisco Bureau Chief Jon Swartz @jswartz on Twitter.