Apple CEO Tim Cook said iPhone 5 sales in the first three days were "the best first weekend sales ever in China." Let's analyze the numbers.
4. Negotiations between China Mobile and Apple are far from over.
Many industry analysts are singing pretty much the same tune: To tap into the world's biggest phone market, Apple has to cooperate with China Mobile, the world's biggest mobile carrier with almost 700 million users. While there is evidence that China Mobile and Apple have been talking, it’s far from clear how much China Mobile is prepared to give, in terms of subsidies it must offer to ensure big sales of iPhones in China.
It’s clear that Apple wants China Mobile to offer iPhones. But a better question is how badly China Mobile needs iPhones to win more subscribers, and how actively it will promote the switch from feature phones to new smartphones designed for TD-SCDMA networks. Don't forget that China Mobile already has a variety of entry-level Android smartphones designed to work in TD-SCDMA. China Mobile also just added Nokia’s Lumia smartphones to its arsenal.
Apple could help China Mobile bridge the gap by rolling out iPhones that are compatible with not just TD-SCDMA but also the upcoming TD-LTE. This could boost China Mobile’s TD-LTE marketing campaign. But, by all accounts, that market segment (TD-LTE handsets that work in multi-band, multi-standard global cellular networks) is not likely to take off until late 2013.
5. China is Apple's second-largest and fastest-growing market, contributing 15 percent of its revenue.
Apple’s unique qualities, which often run counter to the conventional wisdom in the consumer electronics industry, include: leading with less variety in terms of models and pricing. It doesn't hesitate about being the highest priced smartphone and frequently bulldozes its way into new markets by leveraging the sheer power of its brand name.
This is what we admire and sometimes fear about Apple. But this is also precisely the reason why we keep wondering how long Apple can sustain the myth of its unique qualities. China may be the market that breaks the mold.
Apple has positioned themselves in the market as high dollar items and has a following that is more than willing to pay for them. Oddly enough, their price point is their appeal.
If apple dropped prices to compete head on with other manufacturers, then I would suspect that their overall sales volumes would drop at a proportional rate. The perceived value of being overpriced creates the illusion of a 'better' product. A drop in price equates them to being a commodity product like every other device. Once exclusivity is lost, so are the sales numbers.
Within the next couple of years, I fully expect corporate apple to redefine their product line into commodity items in order to compete with others. This doesn't mean the technology will bring them down (they will still innovate), but rather the demands of the profit/loss statement. Obscene financial gains have been the norm for apple for the past 10 years or so. Don't believe for one second that ANY blip in the short term finances of apple would not be punished severely in the stock market. Shareholders are a finicky bunch and profits will overshadow technology no matter what the fanboys think.
Consider the analogy of high end retailers. Why is Nordstroms and Macy's still in business when you can buy cheaper clothes at Old Navy? There is always room at the high end for aspirational buyers.
Apple will hold it's own if it maintains it's quality and usability advantage. There are plenty of people willing to fork over lots of dollars for a BMW over a Toyota.
A high end phone is considered a status symbol in the BRIC countries. Similar to luxury cars in the West.
The worst thing that Apple can do is try to compete on price with the other players. Apple is a brand with a lot of brand equity. Just keep innovating...
Exactly, no single artist can dominate for ever, the sun always rise and set. At the same time, many analyst keep fueling the hype because it is the easy way to attract eye balls. Perhaps this is also how analysts make their livings by telling stories that follow the trend instead of spending time to understand and analyze the fundamentals.
@ WW Thinker,
I felt this phone business is getting similar as pop music industry.
there is r&b, rap, EDM etc. No one artist will dominates for 2 long, but each diff style will always has their own fans.
Bert, the situation is changing in China. The competition are not standing still. This is the reason why there is no longer a standing line. Today, there are many sufficiently good alternatives which are cheaper and as good looking! For instance, the new ones from OPPO and ZTE offer higher resolution than the smallish 4" display of iPhone.
Solid? What is that statement based on? Did you speak to the young people, or the old people, or the enterprise users?
In China, iPhone no longer attracts consumers in all age groups. It is so last year: its look hasn't really changed substantially enough. The new map software is a joke. The tiny 4" screen is so smallish that users have to size up the display right away. Competition has caught up and come in all price points with reputation / reliability to back up. China Mobile doesn't really need iPhone especially when iPhone5 lacks behind in many ways. Good luck to China Telecom and China Unicom because they slowly find out that selling iPhone under the pre-paid contract is not as lucrative as it was thought to be. In fact, I was surprised at the negative feedback from many co-workers in China.
among chinese they love to show off their wealth and don't want to be considered 'poor' or 'average'.
generally if a certain lady in a dept get a new gadget the rest will follow fast.
it could cost someone couple of months salary but if it can bring you 'face' or confidence who cares...
it 's similar as US's SUV mentality, if ppl's main battleground is with SUVs then phone would become less important...
"It doesn't hesitate about being the highest priced smartphone and frequently bulldozes its way into new markets by leveraging the sheer power of its brand name.
"This is what we admire and sometimes fear about Apple. But this is also precisely the reason why we keep wondering how long Apple can sustain the myth of its unique qualities. China may be the market that breaks the mold."
Who is "we," may I ask? Does it include me? Hardly.
I have no clue why the cult following. However I have to keep reminding people that Apple was a bit on the skids not so long ago, until Steve Jobs reinvented the company as one that produces trendy hand-held gadgets.
But everyone should know what happens to trendy stuff. You only need to read Sylvie's column on the Sony Walkman Christmas present. Trendy gadgets, very much like trendy nightclubs and trendy clothes, cannot remain so long term.
"It's misleading to say iPhones are too expensive for Chinese consumers.
Yes, unsubsidized iPhones are expensive (starting at $846), but an iPhone 5 with subscription contract could go for as little as $96 in China."
No it's not. That $100 iPhone 5 goes with a what...$50 monthly contract? The vast majority of Chinese people can't afford that anyway. So it doesn't matter if it's $850 unlocked, or $100 with a $50 or higher contract. It's still very expensive for the average Chinese person.