Despite disappointing China debut, iPhone's 2010 predicted to be strong

Posted:
in iPhone edited January 2014
With only 5,000 new iPhone customers signed up at launch, Apple's official debut in China has been viewed as a disappointment. But one Wall Street analyst still believes the handset will still sell 36 million globally in 2010.



In a note to investors Tuesday, analyst Gene Munster with Piper Jaffray said that though the launch of the iPhone in China was "soft," the slow start has not caused him to adjust his projection of 9.2 million iPhone sales in the December quarter.



Munster believed that China would contribute 1 million or 2 million iPhones in total global sales for 2010. But at a sales rate of about 1,500 per day over the first four days in China, Apple would sell only 550,000 phones in its first year, if the pace is maintained.



Still, with a number of other catalysts for the iPhone on the horizon, including expansion to multiple carriers, the analyst said Tuesday he has maintained his projection of 36 million phones sold in 2010.



"We believe the news following the China launch removes one of several wild cards for potential iPhone unit upside in the Dec. quarter," Munster said. "The other major drivers of potential upside include: several launches on new carriers in the UK (1 carrier Nov-09) and Canada (2 carriers Nov-09), pent up demand worldwide given iPhone availability in the Sept. quarter was constrained, as well as the wild card of holiday gift-giving in the U.S."



The iPhone's slow start in China was attributed to a combination of relatively high prices for non-contract handsets, as well as widespread availability of iPhones on China's gray market. The official iPhone through carrier China Unicom does not have Wi-Fi due to government regulation, while less expensive unofficial options do have Wi-Fi.



iSuppli Corp. noted Tuesday that China has a projected 145 million cell phone gray market for 2009, up 43.6 percent from the 101 million in 2008. China's unofficial cell phone market accounts for an estimated 12.9 percent of the 1.13 billion global phone users, and has quadrupled from 37 million in 2005.



"Because of its under-the-table status, China's gray market has been difficult to size up," said Kevin Wang, director, China Research, for iSuppli. "However, with its vast size, growing competitive presence and increasing influence on the global supply chain, this market now must be reckoned with."



While the unofficial market in China continues to grow, overall cell phone shipments are predicted to decline by 8 percent in 2009. By 2013, China's gray market is projected to be 176 million units at an 11.7 percent compound annual growth rate, while the legitimate cell phone market will increase 4.4 percent in the same frame.



Munster said he believes that the disappointing China launch is reminiscent of the iPhone's U.S. debut with AT&T, when 146,000 phones were activated in its first two days. At the time, he said, it caused unfounded concerns about the long-term potential of the iPhone.



He also noted that China is just one player in a large global market. Last month, Apple reportedly increased parts orders for the iPhone by 20 percent in anticipation of the upcoming holiday season. Sales of the iPhone were restricted during the September quarter as Apple struggled to meet global demand for its phone. Despite those issues, Apple still managed to sell a record 7.4 million iPhones.



Apple executive Tim Cook said during the company's quarterly conference call that supply issues were addressed by the end of September and early October.



"I feel good about how we're positioned now," Cook said.

Comments

  • Reply 1 of 17
    irelandireland Posts: 17,799member
    Everyone who wants who in China already had one
  • Reply 2 of 17
    This was such an inevitable outcome. Can't believe Apple went along.
  • Reply 3 of 17
    rokradrokrad Posts: 143member
    It's not like Apple is losing money, right?
  • Reply 4 of 17
    Quote:
    Originally Posted by Rokrad View Post


    It's not like Apple is losing money, right?



    I seriously hope not. However, contracts in China are, in general, quite different from those in the rest of the world.



    Also, if something like that were to happen, it would reflect poorly on Apple management, notably Cook, since the actual signing of of the deal -- if I remember correctly -- happened during SJ's absence.
  • Reply 5 of 17
    sheffsheff Posts: 1,407member
    Yea I think iPhones will continue to be bought on the gray market in China for many years to come, but Apple could not just ignore China, as it has the biggest potential for growth (for obvious reasons) so as long as they are not losing money, the will continue to sell 5,000 per month and hope the grey market goes away for whatever reason.
  • Reply 6 of 17
    The grey market is fine and all for Apple, but the Chinese government is outlawing wifi (just on phones?) so it's just a matter of time before they crack down to support their state run carriers.



    Trying to sell a high priced, wifi-less (thus VOIP-less) iPhone in China is like trying to sell snow to a Alaskan.





    Munster is smoking his own crack. The Chinese don't pay for squat, Microsoft has tried for years to get the Chinese to pay instead of pirate. The Chinese are the world's best bargain hunters.





    The only upside I see is Apple now be will allowed to advertise the iPhone in China.



    The next move is upon the Chinese government either relenting or cracking down if they able to.





    Perhaps Apple should start thinking about moving some of it's manufacturing base to the US now.
  • Reply 7 of 17
    sflocalsflocal Posts: 6,110member
    From articles past, anyone in China that wants an iPhone already has one. Why would anyone pay $1K for a crippled China-blessed iPhone, sans-WiFi when they can get one on the grey-market from Hong-Kong for $200 less, unlocked, WITH WiFi? The 5000 folks that bought one apparently missed the memo on that one.



    I just hope Apple didn't bite the bullet by making millions of crippled iPhone units.
  • Reply 8 of 17
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by anantksundaram View Post


    Also, if something like that were to happen, it would reflect poorly on Apple management, notably Cook, since the actual signing of of the deal -- if I remember correctly -- happened during SJ's absence.



    No Steve Jobs, no Apple.
  • Reply 9 of 17
    Quote:
    Originally Posted by sflocal View Post


    From articles past, anyone in China that wants an iPhone already has one. Why would anyone pay $1K for a crippled China-blessed iPhone, sans-WiFi when they can get one on the grey-market from Hong-Kong for $200 less, unlocked, WITH WiFi? The 5000 folks that bought one apparently missed the memo on that one.



    I just hope Apple didn't bite the bullet by making millions of crippled iPhone units.



    Perhaps Apple was looking for the honest Chinaman?
  • Reply 10 of 17
    Quote:
    Originally Posted by teckstud View Post


    No Steve Jobs, no Apple.



    No teckstud....no comment.
  • Reply 11 of 17
    thomprthompr Posts: 1,521member
    Mactripper,



    The chinese Government has lifted the WiFi ban on phones, but they did so AFTER the first run of manufacturing for the Chinese market.



    So it is only a matter of time (selling the current crippled devices that are already in the channel, until nobody is buying them anymore... which shouldn't take long at this rate) before this issue is rectified.



    This information should be relatively important for any conclusions you are trying to make.



    Thompson



    Quote:
    Originally Posted by MacTripper View Post


    The grey market is fine and all for Apple, but the Chinese government is outlawing wifi (just on phones?) so it's just a matter of time before they crack down to support their state run carriers.



    Trying to sell a high priced, wifi-less (thus VOIP-less) iPhone in China is like trying to sell snow to a Alaskan.





    Munster is smoking his own crack. The Chinese don't pay for squat, Microsoft has tried for years to get the Chinese to pay instead of pirate. The Chinese are the world's best bargain hunters.





    The only upside I see is Apple now be will allowed to advertise the iPhone in China.



    The next move is upon the Chinese government either relenting or cracking down if they able to.





    Perhaps Apple should start thinking about moving some of it's manufacturing base to the US now.



  • Reply 12 of 17
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by Fast Fred 1 View Post


    No teckstud....no comment.



    Comment away.
  • Reply 13 of 17
    Quote:
    Originally Posted by AppleInsider View Post


    Munster believed that China would contribute 1 million or 2 million iPhones in total global sales for 2010.



    "I feel good about how we're positioned now," Cook said.





    It's interesting that Apple almost downplayed the China contract negotiations conclusion and any major excitement or PR pertaining to the iPhone in China....Almost as if there's something missing here.



    The chinese companies that Apple was negotiating with, seemed to be holding out and insisting on Chinese control aver as many areas as possible. They did not want Apple controlling revenues or sales, to name a few. There has been reporting of initial orders of "non WiIFi" phones purchased outright for distribution. Unicom had to know that the WiFi ban in China was about to be lifted.



    Why would they purchase crippled phones despite this knowledge?



    Why is Apple not saying much about this situation except that the next batch will be WiFi enabled?



    Maybe it's a Unicom concern only?



    There's more to the picture than meets the eye.
  • Reply 14 of 17
    Quote:
    Originally Posted by sflocal View Post


    From articles past, anyone in China that wants an iPhone already has one. Why would anyone pay $1K for a crippled China-blessed iPhone, sans-WiFi when they can get one on the grey-market from Hong-Kong for $200 less, unlocked, WITH WiFi? The 5000 folks that bought one apparently missed the memo on that one.



    I just hope Apple didn't bite the bullet by making millions of crippled iPhone units.



    Not everyone wants to spend the time and effort to get the iPhone from Hong Kong. If they sell 1500 a day as reported, that would be huge already.
  • Reply 15 of 17
    quadra 610quadra 610 Posts: 6,757member
    The latest:



    http://www.macdailynews.com/index.ph...rldwide_smart/





    "There's no chance that the iPhone is going to get any significant market share. No chance." Microsoft CEO Steve Ballmer, April 30, 2007
  • Reply 16 of 17
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by anantksundaram View Post


    I seriously hope not. However, contracts in China are, in general, quite different from those in the rest of the world.



    Also, if something like that were to happen, it would reflect poorly on Apple management, notably Cook, since the actual signing of of the deal -- if I remember correctly -- happened during SJ's absence.



    Excellent point.





    Quote:
    Originally Posted by Fast Fred 1 View Post


    No teckstud....no comment.



    It was a nice 3 days last week when it got itself banned.





    Quote:
    Originally Posted by Quadra 610 View Post


    The latest:



    http://www.macdailynews.com/index.ph...rldwide_smart/



    "There's no chance that the iPhone is going to get any significant market share. No chance." Microsoft CEO Steve Ballmer, April 30, 2007



    Wow, RiM is pushing up into Nokia/Symbian?s place. I just hope they can maintain profits when they do it. BOGO isn?t going to satisfy investors.
  • Reply 17 of 17
    teckstudteckstud Posts: 6,476member
    Quote:
    Originally Posted by solipsism View Post


    It was a nice 3 days last week when it got itself banned.



    Not as nice as when you were gone for almost 3 months this past summer. Where were you- in China selling iPhones?
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