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Apple could triple share of Chinese market with $330 'iPhone mini'

post #1 of 30
Thread Starter 
Riding on rumors of a purported "budget" iPhone, Morgan Stanley on Tuesday released a report estimating that Apple could add nearly $2.4 billion dollars to its handset business and triple its addressable smartphone market in China by debuting a $330 "iPhone mini."



In the report, analyst Katy Huberty said that, contrary to a consensus view that the Chinese smartphone market is contracting, prices are actually stabilizing in the region, offering Apple an opportunity to target a new demographic of users. She pointed to historical trends in Apple product launches, noting that the company launched its first sub-$1000 notebook in Oct. 2004, the same year PC price drops recovered from a sharp decline of nearly 10 percent.

Coupled with growing 3G handset shipments on the China Mobile's TD-SCDMA network, Apple could be primed to address an incremental 20 percent of the market, adding to the 10 percent already addressed by the iPhone 5. The world's largest cellular provider by subscribership has yet to officially carry Apple's smartphone, though it was reported in March of last year that some 15 million iPhones were being used on the carrier's slower 2G network.

"We believe Apple could launch iPhone Mini at $330 (about Rmb2,000), in-line with flagship products in China from Lenovo, Huawei, ZTE and Coolpad," Huberty said in the note. "Even in a scenario of low 40% gross margin and 1/3 iPhone cannibalization rate (flattening legacy iPhone shipment growth), which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars."

If the "iPhone mini" were to launch in 2013, Apple's gross profit margin would decline by 2 percent to 49 percent, but the new handset would boost the company's iPhone business by almost $2.4 billion in gross profit.

Huberty said there are several major catalysts to a China Mobile deal, including: the debut of a cheaper "iPhone mini" handset, next-generation TD-LTE licenses and the passage of cellphone number portability legislation, and the willingness on the part of China Mobile to subsidize high-end devices after a TD-LTE launch.

According to the firm, nearly 40 percent of all 3G smartphones shipped in China are TD-SCDMA, a figure up 15 percent year-over-year. Currently, however, none of Apple's iPhone models support the protocol.

TD-SCDMA Growth


For its part, China Mobile has stated that it has been in talks with Apple to become an official partner carrier since 2009, but the companies have yet to reach an amicable agreement. More recently, Apple CEO Tim Cook reportedly met with China Mobile during his trip to the country in January, though the nature of the discussion remains unknown.
post #2 of 30

If Apple gave a shit solely about marketshare, they would do alot of things differently.

post #3 of 30
Yep, $329 will be the price, and they will sell like crazy, everywhere not just in China.
post #4 of 30

iWatch the new iPhone Mini.

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An Apple man since 1977
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post #5 of 30
Apple needs to find a way to pennetrate developing markets
post #6 of 30
No, $200.
post #7 of 30
Quote:
Originally Posted by Slurpy View Post

If Apple gave a shit solely about marketshare, they would do alot of things differently.

Exactly!

Plus... Apple would only release a cheaper iPhone in China if it was financially reasonable to do so. Otherwise... there isn't contest where the winner gets a prize if they sell the "most" things or represent a certain "share" of the market.

Yeah it's a nice trophy to say "we sold this many units" but when was it the goal to actually shoot for that?

Applebee's could sell a lot of meals if their steak dinners were $4.99... but what would be the point?

No restaurant makes their goal to sell the most meals the same way no hardware manufacturer makes it a goal to sell the most phones.

Apple could certainly sell more iPhones in China by making a lower-priced model... but they're still competing in a land of $80 phones. In other words... Apple's share wouldn't change too much in China. And that's fine!

Like you said... market share is not the goal.

Quote:
Originally Posted by rossistboss View Post

Apple needs to find a way to pennetrate developing markets

The only way that's gonna happen is if Apple starts making super cheap phones.

Right now... Apple's cheapest phone is $450. But this article suggests they should make a $330 phone.

That's a nice start... but it's still too expensive for most developing markets.

I'm afraid Apple will just have to be satisfied by making billions of dollars from mid to high-end phones... and leave the cheap phones to someone else.
post #8 of 30
Quote:
Originally Posted by tylerk36 View Post

iWatch the new iPhone Mini.

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Ten years ago, we had Steve Jobs, Bob Hope and Johnny Cash.  Today we have no Jobs, no Hope and no Cash.

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Ten years ago, we had Steve Jobs, Bob Hope and Johnny Cash.  Today we have no Jobs, no Hope and no Cash.

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post #9 of 30

I think that Apple should announce the China Mobile deal on a friday. I don't mean this friday, I mean any friday, whenever the deal happens to get done.

 

Why friday? Because it would give me the satisfaction of seeing the Wall Street manipulator's plans get messed up big time, at least for a day. The China Mobile deal will be huge news, when it happens. As the article states, they've been negotiating it for many years now, since 2009.

 

Based on my basic understanding of Wall Street, AAPL seems to get pinned on fridays, and max pain often wins. There are forces out there which are deliberately trying to make AAPL close at a certain price, and they often succeed.

 

I'm not one of those moronic, brain cell depraved conspiracy theorists who believes that Elvis is alive, or that 9-11 was an inside job or that we never landed on the moon, but I definitely do believe that there is manipulation of AAPL taking place, both legal and illegal manipulation.

post #10 of 30

I really wish these a$$hat analysts would stop gossiping on what Apple "might" do, and just do their overpaid jobs and react to what Apple IS doing.  These guessing games are getting really old, they are 99.9% wrong each and every time, and it's just their way of getting their 15 minutes of fame.

post #11 of 30

I'm not in agreement with those that think Apple cannot penetrate developing markets like China with an inexpensive phone.

 

The original iPod was $399 and 5GB and black and white and huge. It was relatively expensive to make. At first.

 

Now we have a much better 16GB nano for $149 and a 2GB version for $49.

 

Steve Jobs said:

 

"We don't know how to make a $500 computer that's not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there's a lot of them."

 

It's pretty clear that Apple wants to play in the Chinese market and will likely make a great product that offers a lot of value. It will be less expensive, but never cheap (in the sense that those who buy a $500 computer use it).

post #12 of 30
Apple is not going after smartphone market share in China. It's going to let Samsung gobble up all smartphone market share from bottom to top. Apple's share price will probably drop to around $300 and long-term shareholders will get completely destroyed. Wall Street will curse Apple even more and that will pretty much be the end of Apple as an investment.

I believe Apple should stick with high-end smartphones but Wall Street does not like that sort company model. Samsung is Wall Street's new champion and smartphone leader. The only thing that matters is market share and Samsung will pump out at least 150 million smartphones this year. Apple has already been knocked out of the smartphone race and it will only get worse. Android will take Windows place in history with over 90% global market share in smartphones.
post #13 of 30
If Apple decide to sell a Cheaper iPhone i will definitely sell my shares when its stock price rise.

If they release a Bigger 5" screen iPhone i will definitely buy more shares as it rose.

I have yet to see a single so called "Professional Analyst" understand Apple.
post #14 of 30
Quote:
Originally Posted by bugsnw View Post

I'm not in agreement with those that think Apple cannot penetrate developing markets like China with an inexpensive phone.

The original iPod was $399 and 5GB and black and white and huge. It was relatively expensive to make. At first.

Now we have a much better 16GB nano for $149 and a 2GB version for $49.

Steve Jobs said:

"We don't know how to make a $500 computer that's not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve. And there's a lot of them."

It's pretty clear that Apple wants to play in the Chinese market and will likely make a great product that offers a lot of value. It will be less expensive, but never cheap (in the sense that those who buy a $500 computer use it).

Good points. Add to Steve's comment the one from Tim during the call: he explained that instead of trying to create a $500 computer they made the iPad. A different device, but starting at $500.

An iPod nano iPhonized might be a second design in the iPhone lineup, next to a 5" screen - if that's what the market wants. They can call them S/M/L, or iPhone nano, iPhone classic, iPhone.
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post #15 of 30
I still see them doing this. The iPod Mini was a 'cheap' and smaller iPod after all.
If the watch can be used on its own, without the need for a connected iPhone, that might be it.
post #16 of 30
Quote:
Originally Posted by rossistboss View Post

Apple needs to find a way to pennetrate developing markets

Really? You better let Cook know this wonderful idea. I'm sure he could stop playing Angry Birds to make this happen.
post #17 of 30
Apple doesn't need a cheaper iPhone. Wall Street though has theorized that a cheaper iPhone would mean more growth and to their credit it would work, for a moment then level off. Next the same SOBs would say " do you think that cheapo iPhone we bitched that you release is cannibolizing your high end stuff?" Lol! Damn if you do and damn if you don't.
post #18 of 30
Quote:
Originally Posted by Slurpy View Post

If Apple gave a shit solely about marketshare, they would do alot of things differently.


yep

post #19 of 30
Quote:
Originally Posted by samirsshah View Post

No, $200.

I think they should sell phones in China at $19.99. Think of how great their market share will be. /s

Quote:
Originally Posted by bugsnw View Post

I'm not in agreement with those that think Apple cannot penetrate developing markets like China with an inexpensive phone.

I don't think anyone has said that.

What has been said is that Apple will not produce crappy phones. It has also been said that the predictions of $199 or less that have been thrown around are ridiculous - Apple would have to cut far too many corners to produce a phone like that.

Will they produce a cheaper phone specifically to sell in China? I don't know. I guess it's possible that they could remove some features from the iPhone 4 or 4S and lower the price slightly. They're not likely to be able to take out enough cost to cut the price in half (or even greater cuts) as has been proposed.
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post #20 of 30
Quote:
Originally Posted by Constable Odo View Post

Apple is not going after smartphone market share in China. It's going to let Samsung gobble up all smartphone market share from bottom to top. Apple's share price will probably drop to around $300 and long-term shareholders will get completely destroyed. Wall Street will curse Apple even more and that will pretty much be the end of Apple as an investment.

I believe Apple should stick with high-end smartphones but Wall Street does not like that sort company model. Samsung is Wall Street's new champion and smartphone leader. The only thing that matters is market share and Samsung will pump out at least 150 million smartphones this year. Apple has already been knocked out of the smartphone race and it will only get worse. Android will take Windows place in history with over 90% global market share in smartphones.

Never get to 90% as Samsung will abandon it for their own OS/ecosystem.  An then we'll see how much loyalty people have to Samsung.

post #21 of 30
Quote:
Originally Posted by Slurpy View Post

If Apple gave a shit solely about marketshare, they would do alot of things differently.

 

Exactly. High quality manufacturers know they will never have majority market share so they concentrate on quality, value, and customer service. What annoys me is that the market share crowd equates sales numbers with those metrics and have the gall to trash those who choose to buy something actually worth the money. The "good enough" mantra is trotted out on a regular basis. Windows has the biggest market share, therefore it is by their definition the best. Android has the biggest sales numbers, therefore it is superior to iOS. I'm sure BMW doesn't really care how many cars Hyundai sells and I'm pretty sure Apple doesn't care how many smartphones the others sell, especially since Apple rakes in the majority of the profits. 

post #22 of 30
Quote:
Originally Posted by Constable Odo View Post
. Samsung is Wall Street's new champion and smartphone leader.

 

Interesting comment considering Samsung stock does not even trade on Wall Street. Kinda outs your true motive in the post doesn't it.

post #23 of 30
How about ipad mini ? Does it help Apple ?
post #24 of 30
Quote:
Originally Posted by Slurpy View Post

If Apple gave a shit solely about marketshare, they would do alot of things differently.


They don't "solely" care about market share. But there is much more to that statement. There is money to be made off of their ecosystem. Every Android phone sold contributes nothing directly to that end. A really, really cheap iPhone? Probably not. But a lower priced model to get more Apple products into the hands of consumers...sure.

post #25 of 30
Quote:
Originally Posted by lkrupp View Post

 

. I'm sure BMW doesn't really care how many cars Hyundai sells and I'm pretty sure Apple doesn't care how many smartphones the others sell, especially since Apple rakes in the majority of the profits. 

 

BMW's target sales numbers may not relate to Hyundai, but it would be naive to think that BMW group is not actively seeking to increase the number of units sold. In fact they are aiming to be the #1 luxury nameplate in the U.S., seeking to increase unit sales by 25%.

 

From a company press release:

 

"The BMW Group will continue to focus on the premium segment. "Premium is and remains our business model and the basis for the BMW Group's future success. In terms of innovation, design, sustainability and efficiency, our vehicles will continue to set standards in the premium segment", emphasised Reithofer.

Profitable growth will be achieved by launching new products in all vehicle segments and by engaging in new markets. "We are targeting a worldwide sales volume of more than two million vehicles in 2016 and hence significantly earlier than originally planned for 2020", stated Reithofer.

The company remains committed to its long-term profitability targets and aims to achieve a sustainable EBIT margin of between eight and ten percent in the Automotive segment. Depending on political and economic developments, however, actual margins may end up being above or below the targeted range."

post #26 of 30
Come on China Mobile, let Apple in already!
post #27 of 30
Originally Posted by samirsshah View Post
No, $200.

 

SEE?! No matter how cheap Apple makes their mythical "cheaper iPhone", people will still be whining about it. They believe that they deserve an iPhone TRULY for free.

 

Which is why this year Apple needs to take the iPhone 4S to $299 off-contract, unlocked (while still offering it for $0 on-contract, locked), and say, "Here you go; shut up."

Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

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post #28 of 30
Originally Posted by AppleInsider View Post

According to the firm, nearly 40 percent of all 3G smartphones shipped in China are TD-SCDMA, a figure up 15 percent year-over-year. Currently, however, none of Apple's iPhone models support the protocol.

 

Just FYI: TD-SCDMA is China Mobile's proprietary variant of the CDMA 3G protocol.  Phones using only the TD-SCDMA protocol won't work on any other network.

 

Another fact: China Mobile is working on their own proprietary variant of LTE: TD-LTE, which apparently won't be compatible with the LTE (aka 3GPP Long Term Evolution) protocols of any other network.

 

Wild speculation: If Apple wanted to ship a lower-cost iPhone in China that wouldn't cannibalize higher-cost iPhones in other countries through gray market "exports," they could do so by building a special 3G iPhone for China Mobile that only supports TD-SCDMA.  Later, Apple could do the same with a TD-LTE China Mobile-only phone.

 

Wild extrapolation: But if Apple ships a lower-cost iPhone that only works on China Mobile, what could they do to address the (perceived) need for a lower-cost iPhone in the rest of the world (and on other Chinese cell carriers)?  Could they somehow lock the low-cost models to specific carriers to prevent gray-marke exports / cannibalization?

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post #29 of 30
Can Apple make a great $300 phone? Sure. Will it be identical to the iPhone? Nope. Will it be concentric with the iPhone, with a smaller function set and integrated with the iOS ecosystem? Yep. Will Apple make one? Dunno. Outguessing Apple is a fool's game.
post #30 of 30
One that's simpler (so lower price) specifically for the China Mobile TD-SCDMA network I could see.
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