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'Material' market gains expected from Apple's 25 new China stores

post #1 of 37
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With Apple's retail presence delivering growth in Mac and iPhone marketshare elsewhere in the world, the company's plans to build 25 new stores in China is expected to have a significant impact on sales.

Morgan Stanley analyst Katy Huberty released a new note to investors Monday in which she said Apple's plans to build 25 new retail stores in the world's most populous country will be a great benefit for the sale of products in China. Currently, Apple has less than a 1 percent marketshare in Mac sales, but in the last quarter of calendar 2009, unit sales were up 100 percent year-over-year.

The addition of 123 Apple stores in the U.S. between 2004 and 2009 led to a 4.3 percent mac unit share increase over the same span. Another 33 new stores in Western Europe led to a 2.8 percent increase in total Mac market. If those trends play out in China, Apple could be poised for "material" gains in the nation of over 1 billion.

"While a specific timeline wasn't provided, we expect Apple to execute on this strategy over a multi-year period, carefully establishing a presence and building the brand," Huberty wrote.

Morgan Stanley's research has found that Chinese Apple product owners are twice as likely to purchase future Apple products. Apple has an estimated 2 million iPhones already in China, though most are from the grey market, thanks in part to the official China Unicom model lacking Wi-Fi.

Morgan Stanley has closely tracked Apple's progress in China, with a December 2009 survey of 1,050 high-end Chinese consumers showing a "strong underlying demand within the addressable market" for Apple products.



Huberty has previously predicted that Apple will introduce an iPhone with a lower total cost of ownership in June. A new model could be economically friendly to even more consumers, and would help the iPhone platform expand in emerging markets such as China.

In particular, Huberty believes that a pre-paid iPhone in China could sell 10 million units per year. Even without a pre-paid model, Huberty expects Apple's smartphone presence in China to grow to 5 million iPhone sales per year. Morgan Stanley believes Apple has a total addressable market of 50 million Chinese consumers.
post #2 of 37
Apple prices its phones too high for most Americans, let alone Chinese. Asia in general does not accept the concept of a contract, which means fancy foreign phones are too expensive for locals. They use Sciphones and Miphones, which smartly pair a big screen with "just enough" processing power.
post #3 of 37
I predict the Apple stores in China will be smashed in anti-foreigner riots in a year or two.
post #4 of 37
Quote:
Originally Posted by Moloch View Post

Apple prices its phones too high for most Americans, let alone Chinese. Asia in general does not accept the concept of a contract, which means fancy foreign phones are too expensive for locals. They use Sciphones and Miphones, which smartly pair a big screen with "just enough" processing power.

$99, $199 and $299 is expensive for a smartphone with all the capabilities of the iPhone in the U.S?
Compared to what?
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post #5 of 37
This might make sense if the stores are in Hong Kong, Beijing, Shanghai and Taiwan, but 25 stores?
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post #6 of 37
Quote:
Originally Posted by Moloch View Post

Apple prices its phones too high for most Americans, let alone Chinese. Asia in general does not accept the concept of a contract, which means fancy foreign phones are too expensive for locals. They use Sciphones and Miphones, which smartly pair a big screen with "just enough" processing power.

Give us all a quick rundown of these countries system of smart phones and how they handle their billing system.
post #7 of 37
Quote:
Originally Posted by ascii View Post

I predict the Apple stores in China will be smashed in anti-foreigner riots in a year or two.

Yeah, and the country's economy will collapse too. Right. Wow. You must work for Kissinger Associates.

Come back in two years and tell us how your prediction panned out.
post #8 of 37
Quote:
Originally Posted by Moloch View Post

Apple prices its phones too high for most Americans, let alone Chinese.

Yes... the iPhone is doing so poorly in the States because it's overpriced...
na na na na na...
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post #9 of 37
Quote:
Originally Posted by extremeskater View Post

The way the US keeps going China may own us in two years.

This in a small way may help with the balance of trade between the US and China.
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post #10 of 37
If Apple is planning 25 stores in China they are expecting substantial growth. China's middle class is growing fast and with 1.3 billion residents any company has a potentially huge market even if the percentage of buyers is low.

This would also make a China Mobile TD-SCDMA phone even more likely since they do have 530 million subscribers and are growing by 5.5M subs each month.Even a fraction of the China Unicom iPhone subs would be a huge win for Apple financially.
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post #11 of 37
Quote:
Originally Posted by FineTunes View Post

This might make sense if the stores are in Hong Kong, Beijing, Shanghai and Taiwan, but 25 stores?

You really need to do some due diligence before you comment about China. A significant number of cities have populations over 10 million. Talk about modern, most put American cities to shame.

http://en.wikipedia.org/wiki/List_of..._by_population
post #12 of 37
Quote:
Originally Posted by Onhka View Post

You really need to do some due diligence before you comment about China. A significant number of cities have populations over 10 million. Talk about modern, most put American cities to shame.

http://en.wikipedia.org/wiki/List_of..._by_population

I just want at least one or two stores in Hong Kong.
The official service representatives are bad here.
I just want to rock up to buy products in an Apple store or talk to the guys at the Genius Bar.

You would think a city like Hong Kong having all the best brands in the world would have Apple soon?
post #13 of 37
Quote:
Originally Posted by AppleInsider View Post

Huberty has previously predicted that Apple will introduce an iPhone with a lower total cost of ownership in June. A new model could be economically friendly to even more consumers, and would help the iPhone platform expand in emerging markets such as China.

The cost isn't the iPhone but the data and voice plans.... the monthly costs are pretty steep!
post #14 of 37
Quote:
Originally Posted by ascii View Post

I predict the Apple stores in China will be smashed in anti-foreigner riots in a year or two.

I doubt it.

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post #15 of 37
Quote:
Originally Posted by Moloch View Post

Apple prices its phones too high for most Americans, let alone Chinese. Asia in general does not accept the concept of a contract, which means fancy foreign phones are too expensive for locals. They use Sciphones and Miphones, which smartly pair a big screen with "just enough" processing power.

Apple does not pour money into Apple Store locations without doing their homework first. I am certain the stake they put in the ground now will result in tremendous growth later.

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post #16 of 37
Quote:
Originally Posted by Onhka View Post

You really need to do some due diligence before you comment about China. A significant number of cities have populations over 10 million. Talk about modern, most put American cities to shame.

http://en.wikipedia.org/wiki/List_of..._by_population

You're absolutely right. The large cities in China are on par or better than many large modern cities. Well worth the trip if you get the chance, and a real eye-opener.

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post #17 of 37
i already know the locations in Shanghai,
post #18 of 37
Wonder what search engine Apple will use as default in China. Google?
post #19 of 37
Quote:
Originally Posted by pegs View Post

Wonder what search engine Apple will use as default in China. Google?

You are referring to the default search engine on the iPhone? Probably Bing or Yahoo. Google says they will probably pull out very soon.

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post #20 of 37
Quote:
Originally Posted by SpamSandwich View Post

You're absolutely right. The large cities in China are on par or better than many large modern cities. Well worth the trip if you get the chance, and a real eye-opener.

Right on. Hong Kong, Shanghai, Guangzhou and Beijing a few times. You could put Harvard in the corner of some of their universities. Hope to get back to Beijing in as couple of months.

Finally got to Xi'an this trip and was that a real surprise. Would never have known of its existence except that it was a near the site of the Terra Cotta Warriors. Have to get back. Amazing place.
post #21 of 37
Quote:
Originally Posted by Onhka View Post

You really need to do some due diligence before you comment about China. A significant number of cities have populations over 10 million. Talk about modern, most put American cities to shame.

http://en.wikipedia.org/wiki/List_of..._by_population

Actually I would imagine that HK, Shanghai, and Beijing will get the lion's share of stores. with some other cities getting a single store.

As for your other "thoughts" do you really think population is the measure of quality in a city and that "most large cities in china" will "put American cities to shame?" Does this mean that most western cities put chinese cities to shame until recently? In what way? On what scale? For what reason?

Do you have some severe psychological complex?
Are you somehow ashamed or shaming?
post #22 of 37
Quote:
Originally Posted by Onhka View Post

You could put Harvard in the corner of some of their universities. Hope to get back to Beijing in as couple of months.

Again with the "Bigger is better." Are you from Texas or something?
When looking for a good education, the number 1 criteria should be "How big is the campus!"
Oxford? No!
Harvard? No!
University of Florida, Gainsville, Bingo!
post #23 of 37
Quote:
Originally Posted by Motlee View Post

$99, $199 and $299 is expensive for a smartphone with all the capabilities of the iPhone in the U.S?
Compared to what?

A Whopper and fries.

The cost of the phone isn't the problem, it's the cost of the plan. Give us prepaid iPhone plans in the U.S. and I'm in. At $80 a month, never.
Please don't be insane.
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post #24 of 37
Quote:
Originally Posted by DESuserIGN View Post

Actually I would imagine that HK, Shanghai, and Beijing will get the lion's share of stores. with some other cities getting a single store.

As for your other "thoughts" do you really think population is the measure of quality in a city and that "most large cities in china" will "put American cities to shame?" Does this mean that most western cities put chinese cities to shame until recently? In what way? On what scale? For what reason?

Do you have some severe psychological complex?
Are you somehow ashamed or shaming?

My response to
Quote:
Originally Posted by FineTunes View Post

This might make sense if the stores are in Hong Kong, Beijing, Shanghai and Taiwan, but 25 stores?

and my link was to point out that there were more than 4 cities in China* that had the resources, i.e., population, re wealth, education and technology, to support 25 more Apple stores. BTW, Taiwan is not a city in China.

China is still behind the U.S. in wealth but not all Chinese live in trallers.
http://www.chinadaily.com.cn/china/2...ent_580097.htm

*http://www.chinapage.com/photo/whistler/skyline.html and http://www.chinapage.com/photo/whistler/skyline2.html

And if I have a "severe psychological complex" it's because of fucking assholes like you.
post #25 of 37
Quote:
Originally Posted by Motlee View Post

$99, $199 and $299 is expensive for a smartphone with all the capabilities of the iPhone in the U.S?
Compared to what?

Those are prices with contracts, which many people will not accept, including 99% of the humans in Asia.

And since you asked, the Sciphone i68 is $80, has a 3.2 inch touch display, and has two SIM slots, one for work, the other for personal.
post #26 of 37
When it comes to a report on building retail outlets I wouldn't have included Hong Kong (or Macau). I figure the rumour of 25 stores is for mainland China and nothing more.
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post #27 of 37
Quote:
Originally Posted by zindako View Post

Give us all a quick rundown of these countries system of smart phones and how they handle their billing system.

Asians use dual-band GSM phones and they buy prepaid SIM cards whenever they need minutes. The cost per minute is very low, something like 1 or 2 cents. There are no contracts. Minutes include data transfer and all the phones have email programs. Many phones under $150 have Wifi, all have FM radio and quite a few include analog TV. Google Sciphone i68.
post #28 of 37
Quote:
Originally Posted by island hermit View Post

Yes... the iPhone is doing so poorly in the States because it's overpriced...

Relatively few people have iPhones in the US. I think as the recession wears on and gets worse, less and less people will renew their AT&T contracts.
post #29 of 37
Quote:
Originally Posted by Moloch View Post

Relatively few people have iPhones in the US. I think as the recession wears on and gets worse, less and less people will renew their AT&T contracts.

Relative to what, the total population? They surely sell more iPhones than other single nation as clearly noted in their quarterlies, do you have any evidence to support that the US sells less iPhone per capita than other nations?
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post #30 of 37
Quote:
Originally Posted by Onhka View Post

. . . my link was to point out that there were more than 4 cities in China that had the resources, i.e., population, re wealth, education and technology, to support 25 more Apple stores.

Again population, education, and technology are not the issues. Wealth and preference are more important. And while China is getting wealthier, that wealth is concentrated in few hands. I do not see the iPhone at full freight or with its expensive contract as a middle class staple in China even if it is otherwise attractive.

Quote:
Originally Posted by Onhka View Post

China is still behind the U.S. in wealth but not all Chinese live in trallers.
http://www.chinadaily.com.cn/china/2...ent_580097.htm

The whole time I lived in China, I never saw anybody living in a trailer (or trawler, if that's what you meant, although I did know some Hakkas that lived in a sampan.)
And if Apple can sell an iPhone and a Mac to every Chinese who buys a quarter of a million dollar bathtub, they can be assured of having several hundred customers in China!

Quote:
Originally Posted by Onhka View Post

And if I have a "severe psychological complex" it's because of fucking assholes like you.

Blaming your psychological and emotional state on others reveals a great deal. Grow up.
post #31 of 37
Quote:
Originally Posted by solipsism View Post

Relative to what, the total population? They surely sell more iPhones than other single nation as clearly noted in their quarterlies, do you have any evidence to support that the US sells less iPhone per capita than other nations?

The iPhone has done well in the US. But I'm sure it would do better if the TCO were lower. Its not exactly an iPod level of adoption. Let's face it many many more people would prefer to use an iPhone but can't see paying the relatively steep monthly fees.
Hopefully the iPad deal will lead the way to more reasonable rates soon.
post #32 of 37
Quote:
Originally Posted by DESuserIGN View Post

The iPhone has done well in the US. But I'm sure it would do better if the TCO were lower. Its not exactly an iPod level of adoption. Let's face it many many more people would prefer to use an iPhone but can't see paying the relatively steep monthly fees.
Hopefully the iPad deal will lead the way to more reasonable rates soon.

Well, of course it would do better if the TCO was lower. It would do even betterer if the TCO was $0 and even betterest if they paid you to use it. I don't see "doing better" as selling more units if it means your total net profit is lowered because of it.

BTW, doesn't the iPhone business account for more profit per quarter than iPod or Mac business? How long before it could account for more profit than every other segment of Apple's business combined?
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post #33 of 37
Quote:
Originally Posted by DESuserIGN View Post

Again population, education, and technology are not the issues. Wealth and preference are more important. And while China is getting wealthier, that wealth is concentrated in few hands. I do not see the iPhone at full freight or with its expensive contract as a middle class staple in China even if it is otherwise attractive.

The whole time I lived in China, I never saw anybody living in a trailer (or trawler, if that's what you meant, although I did know some Hakkas that lived in a sampan.)
And if Apple can sell an iPhone and a Mac to every Chinese who buys a quarter of a million dollar bathtub, they can be assured of having several hundred customers in China!

Blaming your psychological and emotional state on others reveals a great deal. Grow up.

First of all, did I not say "wealth" and inferred that it was the most important issue, particularly in relation to the potential number of people deemed wealthy.

Who was only talking about the iPhone? The references were to the Apple Store and everything it encompasses.

Relatively speaking, China passed the UK (with its 26 or so Apple Stores) in the number of millionaires and thus should be able with everything else in consideration to be able to support at least the same number.

Even Canada (14 stores) is better serviced. But that is not to say that we deserve more vs China or anyone else.

Having just returned from "Canton*" where my father was born, Beijing and in particular having visited Beijing's University of Medicine, and Technology, as well as the Apple Store, it is obvious that Apple could do well with more presence.

*And if you know anything about China, you will understand why I called it so.
post #34 of 37
At the risk that you will again respond without reflection:
Quote:
Originally Posted by Onhka View Post

First of all, did I not say "wealth" and inferred that it was the most important issue, particularly in relation to the potential number of people deemed wealthy.

Who was only talking about the iPhone? The references were to the Apple Store and everything it encompasses.

Relatively speaking, China passed the UK (with its 26 or so Apple Stores) in the number of millionaires and thus should be able with everything else in consideration to be able to support at least the same number.

Your logic is the heart of the problem. The UK is the size of Iowa and Illinois and has about 60M people. China has about 20 times the population in an area 40 times larger. Further, contrary to what some people think, Apple products are not targeted at a small group of the most wealthy people - those folks with the golden bathtubs which you have pointed us to. So "number of millionaires" is not a good metric for predicting potential success in China. Finally, and again, the wealth distribution curve in China is skewed far to the high end, so even though China has "a lot" of millionaires (but not so many for the huge population and area,) this does not imply it has a proportionally wealthy and proportionally sized middle class to the UK's, with money to spend on Apple products.

Quote:
Originally Posted by Onhka View Post

Even Canada (14 stores) is better serviced. But that is not to say that we deserve more vs China or anyone else.

Actually Canada does deserve more. Canada is the US's largest trading parnter and at this point, there are far more paying Canadian customers than Chinese customers despite the population difference.

Quote:
Originally Posted by Onhka View Post

Having just returned from "Canton*" where my father was born, Beijing and in particular having visited Beijing's University of Medicine, and Technology, as well as the Apple Store, it is obvious that Apple could do well with more presence.

Possibly, but probably only in very particular areas.

Quote:
Originally Posted by Onhka View Post

*And if you know anything about China, you will understand why I called it so.

Sorry, no. I have no idea why You would insist on saying "Canton," a western corruption of the proper Chinese name. (Do you want us to say "Cathy" and "Peking?") Nor do I know why you are using bold when referring to your father. Is it because you think that if we know your father was born in "Canton" it will somehow enhance the substance of your logic?
post #35 of 37
Quote:
Originally Posted by solipsism View Post

Well, of course it would do better if the TCO was lower. It would do even betterer if the TCO was $0 and even betterest if they paid you to use it. I don't see "doing better" as selling more units if it means your total net profit is lowered because of it.

I'm not talking about free iPhones or even the comoditization of the iPhone, but rather increasing revenue and profit by making it attractive to more people. Some folks would say Macs are too expensive, but when you really look at them carefully, they only cost a bit more than, or are on par with similar PC hardware. This is also the case with the iPhone (hardware/software,) but not with the more expensive part of owning an iPhone (service.) Obviously this has to do with Apple's partners and the traditional mobile phone sales model. But it also has to do with what Apple has agreed to. I hope they will move toward more flexible arrangements. Apparently you don't.

Quote:
Originally Posted by solipsism View Post

BTW, doesn't the iPhone business account for more profit per quarter than iPod or Mac business? How long before it could account for more profit than every other segment of Apple's business combined?

And what's your point?
The rest of their business doesn't matter?
They should just do phones?
They don't need to sell to more customers?
What are you saying?
post #36 of 37
Quote:
Originally Posted by DESuserIGN View Post

IAnd what's your point?

My point is that they are doing a damn good job.
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post #37 of 37
Quote:
Originally Posted by solipsism View Post

My point is that they are doing a damn good job.

Well sure, I agree. But since when did apple settle with just that?
Apple is always their own best competitor
While its still early days for the iPhone, I see them perusing the phone market in a way similar to how they have gone after the music player market where they have choices from $60 for a Shuffle to $400 for an iPod Touch (not including the iPhone or iPad.) Eventually they will have a better set of product and service choices for the iPhone too.
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