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Apple still in talks with China Mobile, but in 'no rush' to forge a deal

post #1 of 16
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Apple and China Mobile, the largest carrier in the world, are "firmly engaged" in discussions, but Apple is said to be in "no rush" to produce a new iPhone compatible with the carrier's 3G network.

Apple has produced TD-SCDMA-based iPhone prototypes to test on China Mobile's network, industry sources have told Shaw Wu of Sterne Agee. And the carrier remains in discussions with Apple about a future deal.

But despite all of that, Apple is apparently not in a hurry to provide the iPhone officially to China Mobile subscribers. Instead, he said, effort is focused on developing a 4G TD-LTE iPhone, so that a future hardware upgrade with high-speed 4G data will be compatible with China Mobile.

The problem stems from China Mobile's proprietary 3G TD-SCDMA network, which would require that Apple build a unique iPhone for compatibility. It's a similar problem in the U.S., where T-Mobile's proprietary 3G GSM network does not work with any of Apple's iPhone models.

Even without an official agreement in place, there are already 10 million unlocked iPhones on China Mobile's network. Those users rely on both Wi-Fi and China Mobile's slower 2G EDGE network for data.

Wu noted that China Mobile has also been enticing iPhone users to use its network by offering free gift card promotions with Wi-Fi service. China Unicom is currently the only official provider of the iPhone in China.



China Mobile remains the largest prize for Apple in terms of carrier partners. The company has more than 611 million subscribers, representing a huge, largely untapped base of customers that Apple has yet to reach.

Even China's other major carrier, China Telecom, is also rumored to get into the mix. Last month one report claimed that China Telecom is expected to gain access to the iPhone around mid-2012.
post #2 of 16
it does not make senses to have a separated td-scdma iphone. lte will resolve the issue, so china mobile can just wait.

one of the main reasons that there are so many iphones on china mobile's network is that china mobile is the earliest mobile carrier in china and many customers do not want to change their cell phone number. somehow china unicom requires a new number for its iphone purchase. i don't know why they do this way, but if this restriction can be removed, more will flood to china unicom for iphone.
post #3 of 16
Quote:
Originally Posted by anakin1992 View Post

it does not make senses to have a separated td-scdma iphone. lte will resolve the issue, so china mobile can just wait.

I don't think it makes sense to sell 250M iPhones in 2012that would contain chips for TD-SCDMA'3G' and then later TD-LTE '4G". Luckily for vendors China Mobile is so fricken large and doubly lucky for Apple the iPhone is so popular on their network, even with just GSM '2G' access that it would well warrant the development of a new iPhone for Chian Mobile the way it warranted development for Verizon Wireless.
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post #4 of 16
Quote:
Originally Posted by anakin1992 View Post

it does not make senses to have a separated td-scdma iphone. lte will resolve the issue, so china mobile can just wait.

one of the main reasons that there are so many iphones on china mobile's network is that china mobile is the earliest mobile carrier in china and many customers do not want to change their cell phone number. somehow china unicom requires a new number for its iphone purchase. i don't know why they do this way, but if this restriction can be removed, more will flood to china unicom for iphone.

You can't say it doesn't make sense without giving some numbers. There is a fixed investment cost for Apple to make a phone with new hardware inside. The two companies could certainly come to an arrangement whereby it would make sense for Apple to make a new model. It was said that a Verizon iPhone would never make sense either, and yet here we are.

600 million users is a hell of a lot. If Apple got 10% of those that would be 60,000,000 x $600 or so, which is $36 billion in revenue, about $20 billion in profit. You don't think the development of a TD-SCDMA phone would cost Apple 20 billion, right? What, maybe Apple only gets 5%? I doubt they'd be crying for only 20 billion in new revenue.

Apple now knows the cost of leaving a market out in the cold from the iPhone. I believe the lack of an iPhone on Verizon is the reason Android is a player in the market. Apple will do the math and if CM makes it worth their while (perhaps by guaranteeing sales of a certain number of phones) then the deal will be made.
post #5 of 16
Quote:
Originally Posted by cameronj View Post

.... $36 billion in revenue, about $20 billion in profit.

How do you come up with that (56%), considering that Apple's profit (net income) margin is ~23% - 24%?
post #6 of 16
Quote:
Originally Posted by cameronj View Post

600 million users is a hell of a lot. If Apple got 10% of those that would be 60,000,000 x $600 or so, which is $36 billion in revenue, about $20 billion in profit.

I think 10 million iPhones on a network of 600 million users is a 1.7% saturation rate for a device that has is not officially sold and only works on '2G'. Not to shabby.
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post #7 of 16
Quote:
Originally Posted by anantksundaram View Post

How do you come up with that (56%), considering that Apple's profit (net income) margin is ~23% - 24%?

Why would you take Apple Inc's profit margin instead of the gross profit margin on the iPhone line? Which is around 50%. I don't see why you'd factor in the costs of Apple stores and other SG&A when determining the marginal profit gained from selling one more iPhone. Can you justify why you'd do that?

Not that it changes the point either way. Which is that the profits available to Apple from launching an iPhone for such a large market far outweigh the costs.
post #8 of 16
Quote:
Originally Posted by cameronj View Post

Why would you take Apple Inc's profit margin instead of the gross profit margin on the iPhone line? Which is around 50%. I don't see why you'd factor in the costs of Apple stores and other SG&A when determining the marginal profit gained from selling one more iPhone. Can you justify why you'd do that?

Not that it changes the point either way. Which is that the profits available to Apple from launching an iPhone for such a large market far outweigh the costs.

1) Because you said "profit", not "gross profit."

2) While retailing costs and SG&A are not variable costs, surely at an extra $36B, they will not stay at their original levels. I.e., new investments in fixed costs will be needed.

3) Yes, I agree with your point that the benefits will significantly outweigh costs.
post #9 of 16
China Mobile may not be the cash cow everyone thinks it is. Although the largest number of Chinese are their customers, it is a state-controlled company, and these companies typically demand technology transfer in exchange for access to Chinese markets. Personally, I think Apple should forget about them if they make such demands.

In addition, the vast majority of Chinese do not earn much money... for China Mobile to have this many customers, I'm guessing most opt for the cheapest phones and plans.

I'd like to hear from China Mobile users first hand.

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Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

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post #10 of 16
Quote:
Originally Posted by solipsism View Post

I don't think it makes sense to sell 250M iPhones in 2012that would contain chips for TD-SCDMA'3G' and then later TD-LTE '4G". Luckily for vendors China Mobile is so fricken large and doubly lucky for Apple the iPhone is so popular on their network, even with just GSM '2G' access that it would well warrant the development of a new iPhone for Chian Mobile the way it warranted development for Verizon Wireless.

sorry that my point was not clear.

to do TD-SCDMA, there are couple of ways for apple to do:

1: do it now with chipset from MARVELL or ZTE. the cost to make it happen is nothing comparing with the time it takes to make it happen. 8-12month is conservative estimate to test and have a field trial and put into mass production. these steps are not tiny and billion dollar can not buy them to a shorter version
2: do it on LTE iphone which might have LTE/TD-SCDMA built in already from QUALCOMM. it is ongoing effort for iphone 6. i don't know the spec on this chipset, but if it can support TD-SCDMA, then china mobile can have it on their 3G network if they don't want to upgrade to TD-LTE

to do TD-SCDMA, there are couple of ways for china mobile to do:

a: upgrade their existing network to TD-SCDMA 100%. this means that it can stay at 3G for long time until they can recover their capex for 3G equipment. were i china mobile, i would let my network milk in money as long as it can. for their current 3G TD-SCDMA network, only 1/6 of its customers are on 3G, so you can see they are still trying to make money on their old network

b: upgrade their existing network to TD-LTE mixing with TD-SCDMA. this means that apple or someone else has to create a phone set to support both. so apple might be able to have a unified iphone for both TD-SCDMA and TD-LTE. but china mobile has to dig deep into pocket to upgrade to TD-LTE which would obsolete their existing 3G network.

so in my humble opinions, it does not make sense to have a separated TD-SCDMA iPhone, if were i apple. for china mobile, they want it of course.

by the way, my assumption above was based on my reading on qualcomm spec on their LTE modem chipset coming for iphone. i could be wrong.
post #11 of 16
that Apple's iPhone business is supply constrained, that's why there is no rush.
post #12 of 16
Quote:
Originally Posted by SpamSandwich View Post

China Mobile may not be the cash cow everyone thinks it is. Although the largest number of Chinese are their customers, it is a state-controlled company, and these companies typically demand technology transfer in exchange for access to Chinese markets. Personally, I think Apple should forget about them if they make such demands.

In addition, the vast majority of Chinese do not earn much money... for China Mobile to have this many customers, I'm guessing most opt for the cheapest phones and plans.

I'd like to hear from China Mobile users first hand.

you are wrong, i'm on china mobile and i've seen within a year how many people have changed and how much they are falling in love with apple… since the launch of iP4 and iPad, now everybody here knows what "apple" is and it is getting more n more popular… before 2010 not many people knew what is iPhone or apple company and suddenly now everybody knows it and even the common people knows in advance the upcoming products from apple…

my way or the highway...

Macbook Pro i7 13" with intel SSD 320 series and 8GB RAM, iPhone 5, iPad 3 (Retina)

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my way or the highway...

Macbook Pro i7 13" with intel SSD 320 series and 8GB RAM, iPhone 5, iPad 3 (Retina)

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post #13 of 16
China Mobile are now focused on TD-LTE, A true international standard that all previous WiMax Network will properly move to, and there are already a few company deploying TD-LTE.

China Mobile are only deploying TDS-CDMA based on their current contract terms.

Qualcomm only has an All in one TDS-CDMA Chipset with their lastest LTE Offering.
post #14 of 16
Quote:
Originally Posted by ksec View Post

China Mobile are now focused on TD-LTE, A true international standard that all previous WiMax Network will properly move to, and there are already a few company deploying TD-LTE.

China Mobile are only deploying TDS-CDMA based on their current contract terms.

Qualcomm only has an All in one TDS-CDMA Chipset with their lastest LTE Offering.

1) Note that TD-LTE is not LTE, it's homegrown version, just like their TD-SCDMA is a homegrown '3G' based off 3GPP's UMTS.

2) Which Qualcomm world mode chip supports TD-SCDMA?
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post #15 of 16
Quote:
Originally Posted by solipsism View Post

1) Note that TD-LTE is not LTE, it's homegrown version, just like their TD-SCDMA is a homegrown '3G' based off 3GPP's UMTS.

2) Which Qualcomm world mode chip supports TD-SCDMA?

1: if TD-LTE is TDD-LTE, then TD-LTE is one of LTE; another flavor is FDD-LTE. TDD-LTE is not homegrown version by china
2: Qualcomm provides a LTE data modem chipset, MDM9615, which might be able to support:
(a) LTE(both FDD and TDD)
(b) DC-HSPA+/EV-DO Rev-B/TD-SCDMA
http://www.qualcomm.com/news/release...le-broadband-0
post #16 of 16
An article I missed over at 9to5Mac.

http://9to5mac.com/2011/09/05/tired-...-own-handsets/

Reportedly the Chinese Telecoms don't plan to wait on Apple. They're forging ahead with their own handset plans instead, and undercutting Apple substantially in the process.
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