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China Mobile deal, 'mini iPhone' would give Apple a larger piece of a $70B market

post #1 of 25
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With rumors and evidence of an agreement between China Mobile and Apple continuing to grow, one Wall Street analyst believes the growth of mobile Internet in the nation of over 1 billion "opens up a whole new world" for the iPhone.

Analyst Brian White with Ticonderoga Securities estimates that the high-end mobile phone market in China represents between 100 million and 125 million subscribers. In his view, that equates to a total potential revenue opportunity of $70 billion.

"The numbers speak for themselves," he said in a note to investors on Thursday. "For example, Apple generated approximately $5 billion in revenue from Greater China during (the first half of fiscal 2011) or 10% of sales compared to $3 billion for all of (fiscal year 2010)."

White's comments come in response to a report on Wednesday that claimed Apple Chief Operating Officer Tim Cook was at the carrier's corporate headquarters, ostensibly to broker a deal related to the iPhone. China Mobile would represent the greatest opportunity for Apple, as it has over 600 million active subscribers and is the largest carrier in the world.

"Traveling to China is a major undertaking and we doubt Tim Cook would be visiting China Mobile unless the two companies were getting close to a partnership," White said. "Essentially, we believe the data points in recent months foreshadow an accelerated relationship between the two companies and we are inclined to believe that an announcement is imminent over the next several months."

White sees an anticipated deal with China Mobile as the perfect time for Apple to unleash a "mini iPhone." He believes a lower priced model would expand Apple's customer base in countries like China, and other developing nations around the world.



Predictions of a cheaper iPhone are nothing new, and have been viewed as a way for Apple to expand the potential market of its smartphone business. Surveys in China have shown that hardware cost, service plan cost and upfront payment are the biggest three hurdles, respectively, to iPhone adoption.



Earlier this year, both Bloomberg and The Wall Street Journal reported that Apple is working on a smaller, cheaper iPhone to combat growing competition from Google's Android platform. It was said that such a device would be about half the size of an iPhone 4, and would be sold for $200 without a contract.

Soon after, The New York Times also offered its two cents, and claimed that Apple is not in fact developing a smaller handset. That report did indicate that Apple has shown interest in developing a cheaper version of the iPhone.
post #2 of 25
Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.
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post #3 of 25
Quote:
Originally Posted by jragosta View Post

Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.

Ya..Right!!...but you are no Tim Cook!!!
post #4 of 25
Quote:
Originally Posted by jragosta View Post

Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.

1) I think White's comment might be taken out of context a bit and then taken too literary by you.

2) I've seen the Amazing Race and Survivor, China can be a major undertaking.

3) 1/5th of the world's population doesn't think it's a big deal to go to China because they already live there. \
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post #5 of 25
Quote:
Originally Posted by Y.M.S.BUSHAN View Post

Ya..Right!!...but you are no Tim Cook!!!

It is first time Tim Cook visiting China and first executive from Apple visit China. Steve Jobs itself never visit China, unlike you did 3 time a year. Admitted. It is big deal.
post #6 of 25
Quote:
Originally Posted by jragosta View Post

Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.

He probably hopped a ride on Steve's Gulfstream V.
With as many potential customers as China Mobile represents, I could see Apple creating a smaller, cheaper iPhone exclusively for the Chinese market.
One factor that makes this possible is that because China Mobile uses an incompatible 3G technology, the phone would be useless outside of China.
Apple would not have to worry about these phone be sold elsewhere.
post #7 of 25
Quote:
Originally Posted by jj_qq_ww View Post

It is first time Tim Cook visiting China and first executive from Apple visit China. Steve Jobs itself never visit China, unlike you did 3 time a year. Admitted. It is big deal.

Tim Cook has been to China many times.
post #8 of 25
Quote:
Originally Posted by Johnny Mozzarella View Post

Tim Cook has been to China many times.

You are right. He did visit Foxconn. I corrected myself, first time to visit China Mobile.
post #9 of 25
Quote:
Originally Posted by jj_qq_ww View Post

You are right. He did visit Foxconn. I corrected myself, first time to visit China Mobile.

Of course he went before to take a first look at their slavery operation.
post #10 of 25
Quote:
Originally Posted by jragosta View Post

Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.

My guess is that Tim Cook and his entourage didn't fly commercial.

They either borrowed Steve's jet or they hired a private business charter.
post #11 of 25
Quote:
Originally Posted by cvaldes1831 View Post

My guess is that Tim Cook and his entourage didn't fly commercial.

They either borrowed Steve's jet or they hired a private business charter.

On a 12+ hour flight it is actually nicer to go commercial; you have headroom and enough space to walk around. The only challenge is if the schedule works for your meetings. One of my old bosses would do a "turn" for meetings in Asia; he would fly out on the same plane he came in on, about 3 hours after it landed.

But... no it isn't that big of a deal to go to China today.
post #12 of 25
I've been pondering this whole idea of a mini iphone and I can't help thinking that perhaps it is true. But it is NOT a smart phone. Rather it is literally a phone. Same easy interface as the iphone but without the bells and whistles of all the apps, email etc. Just the phone, address book, calendar and a rear camera. Thus it needs a lot less storage space (say like 4GB tops) and would be a lot cheaper because there's no need for all the licensing for wifi etc.

And given that apparently the Chinese govt is a total pill when it comes to wifi devices (to the point that they tried to force Apple remove wifi from the iphone to sell it in China) they would love this phone and would bless its sales in the country in a heartbeat.
post #13 of 25
I like my stock analysis with a portion of corporate strategy backseat driving.
post #14 of 25
I think this is happening. The cheaper iPhone needs to be differentiated in some way so it doesn't feel like a cheap iPhone, though. Making it smaller makes sense. I think they'll do something like make the iPhone 5 have a 4" edge to edge screen and then have an iPhone mini with a 3" display, less storage and a cheaper camera.
post #15 of 25
Quote:
Originally Posted by aaarrrgggh View Post

On a 12+ hour flight it is actually nicer to go commercial; you have headroom and enough space to walk around.

Unless like the google guys you have a private 767
post #16 of 25
I can't see Apple going any smaller than a 3.2" display on the iPhone and that probably wouldn't save them any money over the existing 3.5" one, but it would help to differentiate models if they decide to make a larger one for those of us with aging eyes and the heavy users who need a bigger battery.

Personally I'd like an iPhone with a 4.25" edge-to-edge display in a body slightly larger than the existing iPhone, but I'm not holding my breath. I don't think Apple will ever deviate from the one size to rule them all approach.
post #17 of 25
Quote:
Originally Posted by Bregalad View Post

I can't see Apple going any smaller than a 3.2" display on the iPhone and that probably wouldn't save them any money over the existing 3.5" one, but it would help to differentiate models if they decide to make a larger one for those of us with aging eyes and the heavy users who need a bigger battery.

Personally I'd like an iPhone with a 4.25" edge-to-edge display in a body slightly larger than the existing iPhone, but I'm not holding my breath. I don't think Apple will ever deviate from the one size to rule them all approach.

I think they will, but it won't be an iPhone.

That is to say, the iPhone is increasingly becoming "one device to rule them all" in that the next iPhone will be a world phone and possibly a world LTE phone as well. So it seems to me that the only sensible "iPhone nano" would be something that isn't really an iPhone at all, with a different screen size and ratio, different apps (or no apps), and a completely different design.

Everyone keeps talking about them making a slightly different sized screen or an iPhone with less memory or lower resolution but those would simply take away market share from the original iPHone and couldn't really be significantly cheaper in the long run anyway. I still think if the iPhone nano appears at all, it will be a feature phone with just a few built-in apps, no store, and an iPod built in.

It's also pretty obvious that *something* is up with the iPods this year.
post #18 of 25
Quote:
Originally Posted by jragosta View Post

Sorry, but I just can't take anyone seriously who says: "Traveling to China is a major undertaking".

I went 3 times in one year - and didn't even have the advantage that Cook would have (first class seats, several hours shorter plane right, fewer time zone changes).

It's a long trip, but it's not a major undertaking. Anyone who thinks it is is clearly not qualified to be discussing international business.

I had the same reaction. I live on the east coast, and have braved that trip... as you said, long, but not a major undertaking. Not that big of a deal, really.

Perhaps it's taken out of context, but I see no reason why it should be read into any more than a trip to Europe.
post #19 of 25
I agree with the NY Times, I think a "less expensive" version is more likely than a "mini" iPhone. The iPhone 4 with it's glass, stainless steel band and retina display is a luxurious product in the consumer electronics field. I can see the same engineering and product development costs being the key to driving down the cost of a great cell phone in a more basic model.
post #20 of 25
Quote:
Originally Posted by rp2011 View Post

I agree with the NY Times, I think a "less expensive" version is more likely than a "mini" iPhone. The iPhone 4 with it's glass, stainless steel band and retina display is a luxurious product in the consumer electronics field. I can see the same engineering and product development costs being the key to driving down the cost of a great cell phone in a more basic model.

If that was all that was being discussed then they could just keep shipping them 3GSs, which admittedly may be the plan. They may prefer to keep a bit of the luxury and reduce the price in other ways, there may even be a genuine market preference in China for smaller handsets. Apple may not do market research but it does watch closely what competitors do and how they fare, and it has its own retail operations in China that will be giving feedback as to what the most common complaints are.
post #21 of 25
Quote:
Originally Posted by rp2011 View Post

I agree with the NY Times, I think a "less expensive" version is more likely than a "mini" iPhone. The iPhone 4 with it's glass, stainless steel band and retina display is a luxurious product in the consumer electronics field. I can see the same engineering and product development costs being the key to driving down the cost of a great cell phone in a more basic model.

This is the most salient and correct evaluation. Size has very little to do with cost. A person with a low income doesn't need a retina display or stainless steel case. The electronics inside and the operating system follow Moore's law and will not be the impediment to making a cheap phone. A plastic case with a decent display, minimal memory connected to the iCloud, and the fully Apple ecosystem and functionality is what they will do.
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post #22 of 25
Every time there's an article about Apple doing business in China, I feel the urge to speak up for their neighbors to the south: India! In terms of the iPhone, well, granted, all 1 billion Indians won't be able to afford an Apple iPhone in any iteration/version, but practically every Indian, from the CEO of Tata Steel to the lowly $2 a day laborer has a mobile phone of some kind. And every phone in India that doesn't have a legitimate Apple logo on it (which, let's face it, is every phone in Indiaexcept for maybe three iPhones ) is money that Apple has lost to a competitor.

If Apple does create some kinda "iPhone mini" or a "dumb" iPhone (i.e. a "feature phone" with camera, but no third party apps or other "smart" capabilities), and keeps the price low, that would be a great opportunity to get their foot in the door for the Indian market. Okay, the $2 a day laborer won't be able to afford it, but everyone from lower middle class and above would. And, of course business owners, CEOs, etc. would be able to get the full-on iPhone. Apple could easily sell several million units in India if they put a bit of effort into marketing.

But right now, Apple is alien technology to Indiansat least that's the reaction I get whenever someone sees my MacBook.
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post #23 of 25
Quote:
Originally Posted by Futuristic View Post

Every time there's an article about Apple doing business in China, I feel the urge to speak up for their neighbors to the south: India! In terms of the iPhone, well, granted, all 1 billion Indians won't be able to afford an Apple iPhone in any iteration/version, but practically every Indian, from the CEO of Tata Steel to the lowly $2 a day laborer has a mobile phone of some kind. And every phone in India that doesn't have a legitimate Apple logo on it (which, let's face it, is every phone in Indiaexcept for maybe three iPhones ) is money that Apple has lost to a competitor.

If Apple does create some kinda "iPhone mini" or a "dumb" iPhone (i.e. a "feature phone" with camera, but no third party apps or other "smart" capabilities), and keeps the price low, that would be a great opportunity to get their foot in the door for the Indian market. Okay, the $2 a day laborer won't be able to afford it, but everyone from lower middle class and above would. And, of course business owners, CEOs, etc. would be able to get the full-on iPhone. Apple could easily sell several million units in India if they put a bit of effort into marketing.

But right now, Apple is alien technology to Indiansat least that's the reaction I get whenever someone sees my MacBook.

What you're missing is that Apple is not in business to sell lots of phones. They're in business to make lots of money - and if selling phones contributes to that, it's OK.

Just how is Apple going to sell a phone to a $2 a day laborer and make money? All while maintaining the brand that they've created?

Granted, there are a significant number of Indians who can afford an iPhone, but that's true even at the current price point.
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post #24 of 25
Quote:
Originally Posted by aaarrrgggh View Post

On a 12+ hour flight it is actually nicer to go commercial; you have headroom and enough space to walk around.

Have you ever actually seen the inside of a G-5 (or the newer G-6)? For reference, check out the show "Criminal Minds". The "headroom" and the ability to move around put commercial to shame. In other words, in reality, your statement makes no sense.

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post #25 of 25
Quote:
Originally Posted by Futuristic View Post

Every time there's an article about Apple doing business in China, I feel the urge to speak up for their neighbors to the south: India! In terms of the iPhone, well, granted, all 1 billion Indians won't be able to afford an Apple iPhone in any iteration/version, but practically every Indian, from the CEO of Tata Steel to the lowly $2 a day laborer has a mobile phone of some kind. And every phone in India that doesn't have a legitimate Apple logo on it (which, let's face it, is every phone in Indiaexcept for maybe three iPhones ) is money that Apple has lost to a competitor.

If Apple does create some kinda "iPhone mini" or a "dumb" iPhone (i.e. a "feature phone" with camera, but no third party apps or other "smart" capabilities), and keeps the price low, that would be a great opportunity to get their foot in the door for the Indian market. Okay, the $2 a day laborer won't be able to afford it, but everyone from lower middle class and above would. And, of course business owners, CEOs, etc. would be able to get the full-on iPhone. Apple could easily sell several million units in India if they put a bit of effort into marketing.

But right now, Apple is alien technology to Indiansat least that's the reaction I get whenever someone sees my MacBook.

You obviously are travelling in the wrong circles in India. There is a lot of Apple sales to the upper-middle class - rich class here. The White iPhone4 sold out within a week and is still not available (expected stock is next week). The black one is sold out at all Apple re-sellers, except the Service Providers. MacBooks and iMacs are selling pretty well and the iPad & iPad2 just flew off the shelves.

Granted, the quantities are not really huge, but it is selling well. And I get envious looks when I bring out by MacBook Pro. Something about the apple at the back just makes people green!

Bottom line is, like the other person who replied to your post, people can afford the iPhone here in India and they already have it. I do not think that even an iPhone mini would do numbers like what it could do in China. It would open doors to a new strata of people with lower income to pick up an iPhone, but the numbers would never be that significant as to bring Cook down here.
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