Will China Punish Apple Inc. (NASDAQ:AAPL) For Showing Love To India?

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Apple Inc. (NASDAQ:AAPL) is planning expansion in India and that was the clear message the company’s CEO, Tim Cook, delivered when he visited the Asian country recently. Cook said they will set up a research and development center in the Indian city of Hyderabad. The company is also looking to operate native retail stores selling its products, mainly the iPhone, in India.

For any company looking to drive sales in the emerging markets, India is a perfect place to be. The country’s large population and rapidly expanding middleclass means it could be a lucrative market for Apple Inc. (NASDAQ:AAPL)’s pricey iPhones. Although Apple’s iPhones are already sold in India, the bulk of the sales are refurbished iPhones and there is room to sell both new and recycled iPhones in India and Apple can be seen aggressively pursuing that opportunity.

Why China is uncomfortable

But Apple’s seemingly growing appetite for alternative emerging markets is making many in China uncomfortable. Perhaps the greatest upset is coming from Cook’s pledge for an R&D in India at the expense of China, which has for a long time been eying such a facility from Apple.

When you sample Chinese media and how newspapers there reported or commented about Cook’s trip to India, you openly see displeasure with the development. But Apple Inc. (NASDAQ:AAPL) is in the business of making profits and it must constantly seek new growth and profit opportunities as exciting ones fade.

Although China recently rose to become Apple’s most important market for the iPhone, 1Q2016 results showed that Apple’s fortunes in the market are rapidly shrinking. China’s protectionist policies and the country’s maturing smartphone market saw Apple’s share of the market drop to the fourth place.

Apple not ditching China

Apple Inc. (NASDAQ:AAPL) isn’t turning its back on China as sensational Chinese media may want it to appear. When asked in India whether Apple was planning to relocate iPhone production to India from China, Cook said that was not part of their plan. In China, they reported Apple was planning to take some of its production out of the country to India. But you can also see valid reason for Chinese to sweat over Apple’s growing interest for other emerging markets. The economic growth in China has driven up labor costs for Apple’s contract manufacturers in the country and if those manufacturers are fed up, they could relocate to places like India where labor costs are lower.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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