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

Posted:
in iPhone edited January 2014
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.
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Comments

  • Reply 1 of 30
    slurpyslurpy Posts: 5,116member


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

  • Reply 2 of 30
    Yep, $329 will be the price, and they will sell like crazy, everywhere not just in China.
  • Reply 3 of 30
    tylerk36tylerk36 Posts: 1,037member


    iWatch the new iPhone Mini.

  • Reply 4 of 30
    Apple needs to find a way to pennetrate developing markets
  • Reply 5 of 30
    No, $200.
  • Reply 6 of 30
    slurpy wrote: »
    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.

    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.
  • Reply 7 of 30
    tylerk36 wrote: »
    iWatch the new iPhone Mini.

    Hello, calling Dick Tracy...

    dick_tracy_wristwatch_200px.png
  • Reply 8 of 30
    apple ][apple ][ Posts: 8,432member


    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.

  • Reply 9 of 30
    sflocalsflocal Posts: 4,498member


    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.

  • Reply 10 of 30
    bugsnwbugsnw Posts: 712member


    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).

  • Reply 11 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.
  • Reply 12 of 30
    ksecksec Posts: 1,551member
    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.
  • Reply 13 of 30
    bugsnw wrote: »
    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.
  • Reply 14 of 30
    clemynxclemynx Posts: 1,509member
    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.
  • Reply 15 of 30
    jungmarkjungmark Posts: 6,661member
    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.
  • Reply 16 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.
  • Reply 17 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

  • Reply 18 of 30
    jragostajragosta Posts: 10,473member
    samirsshah wrote: »
    No, $200.

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

    bugsnw wrote: »
    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.
  • Reply 19 of 30
    rogifanrogifan Posts: 10,669member

    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.

  • Reply 20 of 30
    lkrupplkrupp Posts: 6,789member

    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. 

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