So much for the hype surrounding Apple’s product launch in China. Analysts were positive the company would announce not only a new, low-priced smartphone, the iPhone 5C, but a long-awaited partnership with China Mobile, the world’s largest telecom operator with more than 730 million users.
Apple delivered on neither. The phone will cost more than US$700, pricing out the bulk of Chinese customers. The eager audience in Beijing was also thoroughly underwhelmed by the recording of Tuesday’s US launch that the company played for them in lieu of the characteristic Apple presentation.
Markedly, there was no deal with China Mobile to speak of. However a document from China’s telecom regulator showed that Apple has indeed been granted a license to use the company’s 4G network, which has yet to be launched.
Missing the market
Apple’s outlook in the world’s largest smartphone market has rapidly deteriorated. The iPhone has been pushed from the fourth most-popular smart device to No. 7 in about a year. The gadget’s market share has declined from about 9% down to 5%.
Industry watchers are now questioning whether or not the new phone can make Apple a meaningful player in the world’s largest market for smartphones.
Although the iPhone 5C might be cheap compared to other Apple models, it is still far too expensive for consumers in small cities around China at the reported price of US$733. If the company was hoping to cash in on the hordes of Chinese that are expected to buy a phone this year, it has completely missed the mark.
Second- and third-tier cities are teeming with young people looking to get on the high-tech ladder. Some 300 million smartphones are expected to be sold in the country this year. The China price point is between US$130 and US$163. Now, those customers are likely to skip the Apple store and opt for a product from a local firm such as Xiaomi, which sells phones at just over what it costs to build them.
At the same time, the release of the 5C will damage Apple’s high-end profile. Since the advent of the iPhone and the subsequent smartphone era, Apple products have been coveted by Chinese as a status symbol. One Chinese youth even reportedly sold a kidney to get his hands on a unit.
The 5C could erode the image that drove such a compulsion to own the product. Some are already joking that the “C” stands for “cheap.”
A meeting of giants
Even without the a tie-up between China Mobile and Apple, the US firm still has substantial support from China two smaller mobile carriers. The poison apple rather would be missing the launch of 4G, with data speeds that would complement smartphones, which China Mobile will likely lead.
Much has been said about China Mobile’s customer base in China. And rightly so: The state-owned firm provides telecommunications services to more people than any other company in the world. Combined user numbers at the two smaller telecos, China Unicom and China Telecom, still fall about 235 million users short of China mobile’s total.
However, when comparing 3G users, the behemoth’s advantage looks far smaller. In June, China Mobile had 129 million smartphone-toting customers. The two smaller companies had a combined 179 million users. One bit of information that did escape the lackluster launch today was that Apple would be shipping the 5C to the smaller companies, both of which Apple partners with.
The importance of an Apple-China Mobile tie-up will become clearer toward the end of the year as the carrier prepares to launch 4G. China Mobile will likely have long head start on the other outfits.
Now that Apple has the license to supply phones for China Mobile’s 4G network, it will have to work out the kinks in what is likely a deal nearing completion. When it is ready to go public, the launch needs to more meaningful than the snoozer on Wednesday.