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IDontUseTheForumSoWhyAmIForcedToMakeANickname
Apple has positioned themselves in the market as high dollar items and has a ...
BobsUrUncle
Consider the analogy of high end retailers. Why is Nordstroms and Macy's still ...
Yoshida in China: Demystifying Apple’s iPhone 5 launch
Junko Yoshida
12/17/2012 11:30 AM EST
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.
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rick.merritt
12/17/2012 12:11 PM EST
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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junko.yoshida
12/17/2012 12:56 PM EST
I think the demand for iPhones in China is still solid. The real question is how long Apple can hang onto its current strategy of expanding its sales via the sheer power of its brand name.
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WW Thinker
12/18/2012 9:55 AM EST
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.
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sranje
12/17/2012 1:21 PM EST
Thank you Junko, as always.
And City and other "hourly analysts" will eat their words shortly (in a next few hours ;-))
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ChipConnoisseur
12/17/2012 1:45 PM EST
"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.
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Bert22306
12/17/2012 6:56 PM EST
"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.
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WW Thinker
12/18/2012 10:02 AM EST
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.
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sprite0022
12/17/2012 7:14 PM EST
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...
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WW Thinker
12/18/2012 10:05 AM EST
Now Samsung is #1 for smartphone market share, Lenovo is #2 in China. When there are enough choices that are either good enough or better, iPhone is slowly loosing its perception in China.
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sprite0022
12/18/2012 7:07 PM EST
@ 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.
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WW Thinker
12/18/2012 8:05 PM EST
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.
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BobsUrUncle
12/26/2012 7:50 PM EST
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...
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IDontUseTheForumSoWhyAmIForcedToMakeANickname
12/31/2012 1:25 PM EST
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.
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