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Cheaper iPhone could give Apple control of China's smartphone market

post #1 of 41
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A new survey shows that Apple is poised to capitalize on an explosion in sales of 3G smartphones in China, with the iPhone the most popular option, though lower prices could give it the lion's share of sales.

The survey results revealed this week by Morgan Stanley and AlphaWise show 3G handsets and smartphones are taking off in China in 2011. Nearly 90 percent of respondents said they have "high interest" in buying a 3G handset or smartphone as their next phone.

Of those who plan to buy a smartphone, the most popular option is Apple's iPhone. A total of 30 percent of respondents with 3G handset purchase intentions said they will most likely purchase an iPhone, followed by 25 percent for a Nokia device, 7 percent for HTC, 5 percent for Samsung, and 4 percent for Motorola.

The iPhone would be an even more popular option, the survey found, if Apple were to lower the price of its smartphone. With a cheaper option, Apple would command a 53 percent share of 3G phone buyers, leaving Nokia with 20 percent and Research in Motion's BlackBery with 5 percent.

Apple did fall behind Nokia when respondents were asked to share what they believe to be the "leading smartphone brands." Of those surveyed, 78 percent indicated Nokia is a market leader, while Apple was cited by 72 percent.

Both Nokia and Apple are well ahead of their competitors in terms of Chinese consumers' perception of "leading" brands. Motorola and Samsung trailed well behind, being named as top brands by 44 percent of respondents each, while RIM's BlackBerry accounted for 40 percent.



The survey polled 2,029 Chinese mobile phone owners during February and March of 2011. The margin of error for the total sample is plus or minus 1.7 percent.

Morgan Stanley has long maintained that the price of the iPhone has been the greatest barrier to adoption in China. The results of the latest survey lend support for this conclusion, as Apple's share of likely shares increased significantly when cost was not a part of the equation.

There has been evidence that Apple is looking to reduce the cost of the iPhone, with rumors of a smaller handset that would be sold contract-free surfacing earlier this year from both The Wall Street Journal and Bloomberg. Those reports of a new, smaller iPhone were disputed by The New York Times, though it was said that Apple continues to look for ways to reduce the cost of its handset.
post #2 of 41
I wonder then, if a cheap iPhone 3Gs should be offered at the same time as offering the more expensive iPhone 4.

It's interesting to note Windows 7 phones don't seem to be making much impact there!
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post #3 of 41
So, more people would buy an iPhone if it were cheaper? Hm, it must be Obvious Day today.

But in all seriousness, when they asked that question, was the Nokia option also stated to be cheaper? It's not really a good question if a theoretically cheaper iPhone was pitted against a regularly priced Nokia (and other brands) rather than an equivalently theoretically lower priced Nokia.

And more importantly, would Apple make a cheaper iPhone for the Chinese market only and not make it available elsewhere? Sort of like some companies offer their prodcuts for a reduced price in China because if they don't they know it will just get pirated anyway (I think MS does this).
post #4 of 41
I'm not sure what to make of a report like this. My monthly subscription fee costs me around $1K a year, or $2K over the lifetime of the plan. The phone is $600, or $200 subsidized.

So, given that the majority of the cost of owning a smartphone is in the data plan, I'm not sure how much the cost of the phone is going to change overall appetite.

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?
post #5 of 41
Release an iPhone for Sprint and I'll be happy, whatever the cost. And do it before the end of July!
post #6 of 41
Quote:
Originally Posted by AppleInsider View Post

... The iPhone would be an even more popular option, the survey found, if Apple were to lower the price of its smartphone. ...

Breaking news! People would buy more iPhones if they were cheaper. Shocker!
post #7 of 41
There are smart phones and there is the iPhones.

Most smart phones have limited functionality. Just what would be acceptable for Apple to create a 'lite' model? And why would Apple want to do so just to boast about market share?

One of the reasons why Apple does so well with their 'limited' product lines, is that they provide every one of them with virtually the same level of support no matter what their price. And I don't see them compromising just to be on the leader board. They'll be there by doing what they do best.
post #8 of 41
They don't let foreign companies dominate markets over there. If they get too close a law will suddenly and mysteriously be passed giving a local company a monopoly.
post #9 of 41
Quote:
Originally Posted by crustyjusty View Post

I'm not sure what to make of a report like this. My monthly subscription fee costs me around $1K a year, or $2K over the lifetime of the plan. The phone is $600, or $200 subsidized.

So, given that the majority of the cost of owning a smartphone is in the data plan, I'm not sure how much the cost of the phone is going to change overall appetite.

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?

I think they are referring to a pre-paid or pay-as-you-go iPhone. Apparently PAYG is very popular in China and India, but the current iPhone is just too expensive unsubsidised to seriously address this market.
post #10 of 41
Quote:
Originally Posted by crustyjusty View Post

I'm not sure what to make of a report like this. My monthly subscription fee costs me around $1K a year, or $2K over the lifetime of the plan. The phone is $600, or $200 subsidized.

So, given that the majority of the cost of owning a smartphone is in the data plan, I'm not sure how much the cost of the phone is going to change overall appetite.

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?

Most people there use post-paid service with no contract, or shorter term and lower cost contracts. Also, most phones are sold unsubsidized or with small subsidy. Piracy/firmware cracking is the main reason for low subsidies.
post #11 of 41
Quote:
Originally Posted by crustyjusty View Post

I'm not sure what to make of a report like this. My monthly subscription fee costs me around $1K a year, or $2K over the lifetime of the plan. The phone is $600, or $200 subsidized.

So, given that the majority of the cost of owning a smartphone is in the data plan, I'm not sure how much the cost of the phone is going to change overall appetite.

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?

The rest of the world is not organised like the US. In the UK a friend of mine has a data and voice plan for £15 per month, on her (unlocked) iPhone which she got from her husband.

So her iPhone cost is £15 over 2 years, which she would be paying anyway. The incremental cost is therefore zero. For people who want to buy a phone, the unsubsidised cost matters.
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post #12 of 41
Quote:
Originally Posted by ascii View Post

They don't let foreign companies dominate markets over there. If they get too close a law will suddenly and mysteriously be passed giving a local company a monopoly.

They probably would then get an irate call from FoxConn. That said it would make sense for Apple to open some kind of R&D there too.
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post #13 of 41
Quote:
Originally Posted by Onhka View Post

And I don't see them compromising just to be on the leader board. They'll be there by doing what they do best.

Well you would be wrong. All they have to do is produce a cheap phone, could well be the 3GS massively reduced in price. As markets mature they become commodified, if Apple can get 50+% of China, it would be crazy not to do it. And Tim Cook said they were going after a poorer market.

You can still have bragging rights to the iP5.
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post #14 of 41
Quote:
Originally Posted by asdasd View Post

Well you would be wrong. All they have to do is produce a cheap phone, could well be the 3GS massively reduced in price. As markets mature they become commodified, if Apple can get 50+% of China, it would be crazy not to do it. And Tim Cook said they were going after a poorer market.

You can still have bragging rights to the iP5.

Could you describe your 'cheap' phone?

And provide a reference re your Tim Cook statement?
post #15 of 41
Quote:
Originally Posted by Onhka View Post

Could you describe your 'cheap' phone?

I thought I did.

Quote:
And provide a reference re your Tim Cook statement?

http://www.t3.com/news/apple-boss-hi...-iphone?=53923

I didnt source that, and I normally add sources, because it is common knowledge on this forum.
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post #16 of 41
Quote:
Originally Posted by shadow View Post

Most people there use post-paid service with no contract, or shorter term and lower cost contracts. Also, most phones are sold unsubsidized or with small subsidy. Piracy/firmware cracking is the main reason for low subsidies.

Really? Can you cite the source of your info? China Unicom, China Mobile and China Telecom all subsidize smart phones. China Unicom, for example, offers a subsidized iPhone if you sign up for 2 years.

It is also important to note that Apple sells its phones for higher prices in China than in the US (before subsidies). This is perhaps what the article is referring to.
post #17 of 41
Quote:
Originally Posted by asdasd View Post

I thought I did.



http://www.t3.com/news/apple-boss-hi...-iphone?=53923

I didnt source that, and I normally add sources, because it is common knowledge on this forum.

I can't remember now but wasn't that prior to the 3GS dropping to $49.99 with contract? I wonder if so, if that was the cheap iPhone Tim was alluding to?
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post #18 of 41
Quote:
Originally Posted by digitalclips View Post

I can't remember now but wasn't that prior to the 3GS dropping to $49.99 with contract? I wonder if so, if that was the cheap iPhone Tim was alluding to?

no it wasnt. The iphone dropped in price because the Verizon phone was announced. AT&T led that charge - and Apple followed suit. It happened in January and applied to the American market only.

http://www.allvoices.com/contributed...-reduced-to-49

A reduction in an un-subsidised phone of $50 is not much to write home about, in any case. Cook specifically mentions China and PAYG in the report I previously linked to.
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post #19 of 41
Hell! Even homeless people in the US have iPhones now. Guess they make more money milking the .gov tit than working Chinese. Only iPhone I considered over priced was the 1st gen beta model. Skipped that P.O.S.
post #20 of 41
Quote:
Originally Posted by Andykemp View Post

Hell! Even homeless people in the US have iPhones now. Guess they make more money milking the .gov tit than working Chinese. Only iPhone I considered over priced was the 1st gen beta model. Skipped that P.O.S.

Sad. Very sad.
post #21 of 41
Quote:
Originally Posted by asdasd View Post

Well you would be wrong. All they have to do is produce a cheap phone, could well be the 3GS massively reduced in price. As markets mature they become commodified, if Apple can get 50+% of China, it would be crazy not to do it. And Tim Cook said they were going after a poorer market.

You can still have bragging rights to the iP5.

We are approaching the 5th year the iPhone has been out. Its expected that theyd diversify the brand a bit at some point. Personally, I want the display size option to be added, but going with a cheaper version of the 3.5 version might be smarter. Maybe the 3GS HW with the iPod Touchs Retina Display.
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post #22 of 41
I'll give you guys the stats here in Romania. I got my iPhone for around 600 dollars (our money converted to yours). It's locked into Orange (Our main carriers are Orange, Vodafone and Cosmote).

So I use a prepaid card and there's this thing called Orange Young which you can activate (anyone can really, it's easy) and for 5 euros (that's around 7 dollars I believe) I get the following:

- 3000 minutes in my own network (Orange) with friends - also get unlimited talk with 3 friends of my chosing
- Infinite texting (sms) with whomever (inside Orange)
- 75 minutes outside Orange, including other networks and other fixed phones internationally
- 75 text messages outside Orange.
- And as an additional option if I choose it for 3 dollars, I get about 200 mb of internet (which is awesome for push mails and random browsing when I'm not on wi-fi)

So for about 10 dollars per month, I get all that. - That's 120 dollars per year.
Now let's compare.

If i would've gotten my phone on a contract from Orange I would've paid 240 dollars upfront for the phone and a contract of about 60 dollars per month - that's 720 dollars per year for TWO years so that's 1440 dollars! For that money I'd get about 900 texts, about 1200 minutes in Orange.

Really.... the only way I see it and the only way I've seen it thus far ever since owning an iPhone is... it's better to just wait, save up and buy it upfront and use a prepaid card.
post #23 of 41
Quote:
Originally Posted by solipsism View Post

We are approaching the 5th year the iPhone has been out. Its expected that theyd diversify the brand a bit at some point. Personally, I want the display size option to be added, but going with a cheaper version of the 3.5 version might be smarter. Maybe the 3GS HW with the iPod Touchs Retina Display.

an iPhone version of the present generation iPod touch would be cool. I like that form factor.
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post #24 of 41
3G adoption in china is around 5% according to this article ( http://www.networkworld.com/news/201...-sluggish.html ) So even if some percentage of those current customers say they prefer Apple, it still doesn't really tell anything.
post #25 of 41
Oh noes! Now it will take until 2016 for Windows phones to pass iPhones.
post #26 of 41
Quote:
Originally Posted by iTudy View Post

I'll give you guys the stats here in Romania. I got my iPhone for around 600 dollars (our money converted to yours). It's locked into Orange (Our main carriers are Orange, Vodafone and Cosmote).

So I use a prepaid card and there's this thing called Orange Young which you can activate (anyone can really, it's easy) and for 5 euros (that's around 7 dollars I believe) I get the following:

Thanks for the wider view. Was that price for a 3GS or a 4? And what generally is the perceived desirability of the iPhone in Romania, as near as you can tell?
post #27 of 41
Quote:
Originally Posted by Project2501 View Post

3G adoption in china is around 5% according to this article ( http://www.networkworld.com/news/201...-sluggish.html ) So even if some percentage of those current customers say they prefer Apple, it still doesn't really tell anything.

Sure it does! 5% of 853 million is 42.65 million. Even if we ignore any growth of Chinas mobile market and 3G adoption or potentially lower iPhone prices, just take the 30% noted in the article, we have about 11 million iPhones sold in China.

That is certainly a low number compared to the world at large, but its certainly not low for a country or for a a single carrier if we do a direct comparison to new HW for the Verizon iPhone and new HW needed for China Mobiles homegrown 3G, even when ignoring the obvious growth potential for Chinas market.

No viable company will ignore such a huge demand from a such a huge country with a huge growth potential. So far weve seen plenty of signs that Apple is focusing heavily on China. I think they have several new Apple Stores opening throughout the country. How long before China has the more official stores than other country but the US?
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post #28 of 41
The survey showed that most phone owners in China aspired to a smart phone.
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post #29 of 41
Not surprising here. This applies to every other country. Now if only the "official" carriers drop their monthly rates...
post #30 of 41
Quote:
Originally Posted by asdasd View Post

I thought I did.

http://www.t3.com/news/apple-boss-hi...-iphone?=53923

I didnt source that, and I normally add sources, because it is common knowledge on this forum.

Tim Cook never said or even hinted that they were working on a cheap iPhone

Quote:
While Tim stopped short of explicitly stating that Apple would pursue a lower price iPhone, he did state that Apple was working hard to figure out the prepaid market and that Apple didnt want its products to be just for the rich, but for everyone; he also stated that Apple understood price is big factor in the prepaid market and that the company was not ceding any market. Cook noted that Apple executives including himself had spent huge energy in China, noting that it is a classic prepaid market. He further noted that the handset distribution model was poorly constructed and that Apple would look to innovate and do clever things in addressing that market.

http://www.mactrast.com/apples-tim-c...repaid-iphone/

Quote:
Apple CFO Tim Cook got all buddy-buddy with Bernstein Research analyst Toni Sacconaghi this week, talking about Apples business strategy nothing out of the ordinary there but this morning, that analyst decided to publicly paraphrase an intriguing part of the interview. Guess what? It sounds like a cheaper iPhone may indeed be in the cards: While Tim stopped short of explicitly stating that Apple would pursue a lower price iPhone, he did state that Apple was working hard to figure out the prepaid market and that Apple didnt want its products to be just for the rich, but for everyone; he also stated that Apple understood price is big factor in the prepaid market and that the company was not ceding any market. Cook noted that Apple executives including himself had spent huge energy in China, noting that it is a classic prepaid market. He further noted that the handset distribution model was poorly constructed and that Apple would look to innovate and do clever things in addressing that market. As you can see, there arent any statements of fact here, just some general strategy ideas, but if Apple indeed plans to put an iPhone in every pot, it would be helpful if it didnt have to rely on the carrier subsidy model

http://www.techcrazy.info/?tag=tim-cook
post #31 of 41
Quote:
Originally Posted by crustyjusty View Post

I'm not sure what to make of a report like this. My monthly subscription fee costs me around $1K a year, or $2K over the lifetime of the plan. The phone is $600, or $200 subsidized.

So, given that the majority of the cost of owning a smartphone is in the data plan, I'm not sure how much the cost of the phone is going to change overall appetite.

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?

Its not a subsidized market but a pre-paid market. So that answers your question.
Interestingly Apple seems to be steering towards a pre-paid market already, I received a mail from Apple today that from now on pre-paid iPhones can be ordered from the online Apple store. And that's a first in Holland.

J.
post #32 of 41
Onkha. Pretty much the entire quote from Cook proved my point, not yours.
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post #33 of 41
I don't think Apple will make a "cheap" Chinese iPhone. The slightly higher price actually drives consumers to want the phone MORE from everything I've seen. It is an "aspirational" product, whereas Android is the geek-boy phone.

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post #34 of 41
Quote:
Originally Posted by crustyjusty View Post

Are the plans cheaper in China, such that the phone truly is the overriding financial burden?

I pay US$7 a month for my iPhone plan (套餐) in China. That gives me 150MB of data (and 50 minutes of outgoing voice), which is enough for me. I used to be on the US$14 plan (300MB), but found I was only using 120MB a month, so I downgraded.

When I was in Malaysia, I used TuneTalk, a prepaid service that costs US$0.015 per megabyte! Yes, that's only US$1.80 per month for my typical usage.
post #35 of 41
Good info in this thread.

@SpamSandwich - they wont be the cheapest, they will be cheaper at the entry level.
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post #36 of 41
Quote:
Originally Posted by TokyoJimu View Post

I pay US$7 a month for my iPhone plan in China. That gives me 150MB of data (and 50 minutes of outgoing voice), which is enough for me. I used to be on the $14 plan (300MB), but found I was only using 120MB a month, so I downgraded.

When I was in Malaysia, I used TuneTalk, a prepaid service that costs US$0.015 per megabyte! Yes, that's only US$1.80 per month for my typical usage.

That sounds about right. With the yuan (RMB) pegged to 1/7th the dollar, this is what a consumer would pay.

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post #37 of 41
Quote:
Thanks for the wider view. Was that price for a 3GS or a 4? And what generally is the perceived desirability of the iPhone in Romania, as near as you can tell?

That was the price for the iPhone 4. The 3gs is cheaper but at the same contract price with same stuff. I'm in college right now and as far as I can tell, a lot of people have iPhones in my class lol. And even though Apple is less known here as a computer company but more known for iPods and iPhones. I've seen quite a few people with them.

Over here(Romania) the iPhone is available through Vodafone and Cosmote as well, not just Orange, but they mostly have about the same prices and options. Lots to chose from but little incentive to do so, rather, just buy one contract-free and then plug in a sim and activate orange young options which are quite awesome and you've got yourself a sweet deal for 10 bucks haha.

And as for a cheaper iPhone... to me it sounds riddiculous. Apple's whole existance is based around high quality products that aren't cheap and aren't just for everybody. It's not a company that mass-markets all manner of crappy things just to hit a mark. They are calculated and make educated and tactical decisions. The moment they'll ever make a mini-iPhone or a dumbed down version of the iPhone is the day that pigs fly, or maybe if Steve Jobs dies or everyone at apple catches some kind of weird disease that makes them think like the competition in terms of product strategy.
post #38 of 41
Pay as you go is the way to go...if you don't use your phone that much. I'm sure there is a good size market that Apple is missing out on, who can't justify all the bells and whistles of the current phone and monthly cost.
I personally know that all of my retired friends use "pay as you go phones".

I've been a Mac Guy since the beginning so that says that I'm an old user, but a believer of Apple products.

I would love to have an iPhone that links with my Apple Address Book and Calendar.

Hope they produce a "pay as you go" iPhone soon!
post #39 of 41
Quote:
Originally Posted by TokyoJimu View Post

I pay US$7 a month for my iPhone plan (套餐) in China. That gives me 150MB of data (and 50 minutes of outgoing voice), which is enough for me. I used to be on the US$14 plan (300MB), but found I was only using 120MB a month, so I downgraded.

When I was in Malaysia, I used TuneTalk, a prepaid service that costs US$0.015 per megabyte! Yes, that's only US$1.80 per month for my typical usage.

And just to clarify for everyone else, this package is a montly charge on a prepaid plan - you're not actually on a contract, right?

Yeah, the data rates in SE asian countries is quite cheap in general.
post #40 of 41
Quote:
Originally Posted by stelligent View Post

Really? Can you cite the source of your info? China Unicom, China Mobile and China Telecom all subsidize smart phones. China Unicom, for example, offers a subsidized iPhone if you sign up for 2 years.

It is also important to note that Apple sells its phones for higher prices in China than in the US (before subsidies). This is perhaps what the article is referring to.

It would be more accurate to say that these carriers *offer* subsidized phones, in addition to selling them at unsubsidized prices. The majority of folks here are not on contractual plans w/ subsidized phones.

That said, the subsidized iPhone 4 from China Unicom is actually quite a good deal as the phone is unlocked. I've been tempted myself, but the lack of number portability is a bit of a headache so I've been putting it off (I'm currently with China Mobile). The way it works is that you pre-pay for the 2 years of service, and they give you the phone. They don't give you the phone and bill you monthly, as people would just run off with the phone and not pay the monthly bill.

This lack of "trust" (a better term escapes me right now) is why the western model of having service contracts w/ subsidized handsets doesn't work over here.

To give you a better understanding, we pre-pay for our electricity and natural gas here (using smart cards). Even for going to the hospital (non-private ones) - yes, if you don't pay first you won't get treatment. The only thing I get "billed" for is my water usage, but that is dirt cheap.
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