Forget the rest of the world, Apple’s real future is in the BRICS

It’s strange how we all get caught up in the Silicon Valley (and Alley) hype.

If a company’s product fails in the US, it gets punished by the market. Think about RIM’s recent BlackBerry woes. Or the fact that Nokia simply doesn’t register as a smartphone maker in the world’s largest economy.

Apple is king. While that may yet change, it’s a runaway success in North America, and Europe (and demand in Asia is roaring). Being successful in the “west” (at this stage) means mindshare globally. The sheer volume of products like the iPhone and iPad being shipped in developed markets means additional growth in places like Brazil, Russia, India, China and South Africa is almost a rounding error.

The use of the “BRICS” countries is deliberate (without getting into a geopolitical debate) as they are symbolic of the opportunity outside of North America, Europe and Japan. Apple knows this. It’s why we’re seeing distribution opening up into “third tier” markets like Hong Kong, India, Israel, Korea, Macau, Malaysia, Philippines, Singapore, South Africa, Turkey and the UAE shortly after products are released in Europe and Australasia.

This is exactly how the iPad 2 was released, and we can expect a similar distribution strategy when it comes to new products. Already the window between its launches in the US and Europe and the next two groups of markets has been shortened dramatically. Apple knows the real opportunity is in emerging markets.

Tim Cook, then COO, made the point in Apple’s third quarter numbers that “China was very key to our results”. It’s the region where revenue and retail footprint are growing the fastest.

Even stripping out the China impact, demand from the rest of the BRICS has been more than healthy, especially for the iPad. The reason is fairly obvious. Traditional computer penetration is laughably low. And most of those aren’t connected to the internet as traditional (fixed) internet penetration is comparably low.

The iPad changes all that.

For the first time, millions (billions?) of people will be able to experience the internet with little other than a SIM card. The barrier to entry is almost non-existent. The use cases are endless: education, entertainment, healthcare…

Fixed lines aren’t going to suddenly appear across Asia, Africa and South America. Mobile will be the primary means of connecting to the web. Tablets win.

Apple is playing the long game here. Michael Gartenberg, analyst at Gartner, made the point earlier this week: “… the Tablet market right now is a marathon, not a sprint.”

The real opportunity for Apple lies in emerging markets. There’s an addressable market of 4+ billion people, in countries where GDP growth dwarfs that of the west. Add to this billions of consumers urbanising at a rapid rate.

The game will be won not in North America or Europe, but in Africa, Asia and South America.

Image: HaZel2388