MADISON, Wis. – When Apple announced Sunday (Dec. 16) that it had sold more than 2 million iPhone 5s in China, many seemed shocked over the ravenous appetite of Chinese consumers for smartphone. “Record China sales of iPhone 5,” the headlines screamed.
With a seemingly insatiable appetite for news about Apple, most of the reports seem to point in one direction, implying that even though Steve Jobs is dead, Apple ain’t. It hasn’t lost its mojo. Hold that thought for now.
It’s important to note that releasing the first three-day sales data of any product is not something Apple has done before. Apple CEO Tim Cook said in a statement that sales had been “the best first weekend sales ever in China.”
Its stock having fallen more than 25 percent in the last three months, Cook must have felt compelled to say something after negative publicity started to swirl last week focusing on nearly empty Apple stores in China during the launch of iPhone 5.
Let’s demystify a few things about Apple and China.
1. Customer traffic in Apple stores --- there are seven in China – isn't the sole measure of the Chinese consumers’ appetite for iPhones.
After all, Apple instituted an online lottery system to allot sales in order to defeat those who buy and then resell iPhones. In other words, the long queues that symbolize new Apple products were not there simply because Chinese customers aren’t allowed to buy an iPhone without a reservation.
2. Sales of iPhones in China, heavily subsidized by cellular operators, are tightly coupled with mobile carriers’ subscription contracts.
Shanghai Daily reported over the weekend that China Telecom was expecting to sell 10,000 phones on the first day of the launch, while China Unicom said it had sold 5,000 by noon last Friday. There are, however, no comparative figures available for sales by these operators. Such figures require a note of caution: No one knows how much better iPhone 5 has done in initial sales compared to previous iPhones.
3. 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.
It's worth noting that Citi downgraded Apple's stock on reports it is lowering iPhone 5 orders in its supply chain.
So while demand may or may not be solid in China, apparently it is a bit slower than expected globally if these reports are correct.
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