China Mobile unlikely to boost Apple's Chinese gameplay

Faced with competition from local players such as Xiaomi and Huawei, Apple is unlikely to sustain demand when the smartphone begins running on China Mobile's network from January 17, due to its premium price points.
Written by Eileen Yu, Senior Contributing Editor

The growth of local smartphone makers will continue to hinder Apple's plans for a bigger share of the Chinese market, despite its recent deal with China Mobile. 

Citing comments from industry analysts, China Daily reported that the iPhone maker will not be able to sustain an initial upswing in demand when the smartphone begins running on China Mobile's network from January 17, due to its premium price points. 

Apple last month finally inked a deal that will see China's largest carrier, China Mobile, offer the iPhone on its network and potentially lift the U.S. handset maker's share in the Chinese market. With over 760 million subscribers in the country, the telco was the only operator not to distribute the iPhone

Lydia Bi, an analyst with research firm Canalys, said the newly inked deal would boost Apple's market share in China during the first half of the new year, but was unlikely to significantly change the local market landscape in the long term. 

"At the beginning, technology enthusiasts will pick up the new flagship device on China Mobile's newly launched 4G network," Bi explained. "But, this advantage may not last into the second half of 2014 as Samsung and other local competitors will bring out a large number of TD-LTE devices priced at as low as 1,000 yuan (US$163.84) per unit."

China Mobile last month also signed LTE/4G distribution deals with 10 Chinese mobile device channel partners, including Xiaomi, Vivo, Oppo, Gome, and Lenovo. 

Zhang Jin, an analyst with equity research firm Wedge Partners, noted that market demand for the iPhone 5s at China Mobile stores seemed low compared to other operator phone launches. In a recent report based on surveys of sales of mobile platforms, Apple's regional distributors, and mobile operators, Zhang said pre-orders for China Mobile's iPhone 5s--with a service contract--clocked at some 100,000 units in the first two days, compared to China Unicom's 120,000 iPhone pre-orders and China Telecom's 150,000 when the device was first launched last year

"As most of the iPhone enthusiasts, the majority of whom live in big cities, have already picked up their iPhones before China Mobile's official launch, the high prices will limit new additions to the iPhone's user base in China," Bi noted. 

Sun Kai, senior analyst with GfK Group, added that China Mobile was unlikely to aggressively promote the iPhone as it might see the device as an interim 4G product. 

Priced at 5,288 yuan (US$866.38) and 4,488 (US$735.31) for the 16GB 5s and 16GB 5c model, respectively, the iPhone is tagged on a premium price point that exceeds China's average monthly salary. 

In addition to its premium prices, Apple also faces intensive competition from Chinese smartphone makers, specifically low-cost handset maker, Xiaomi, which has enjoyed exponential growth in the past year. 

In an internal memo to his employees, Xiamomi CEO Lei Jun said the company sold 18.7 million handsets in 2013 and was targeting to ship 40 million this year. It also officially opened its office in Singapore as it looks to begin selling its smartphones across the region and globally, said Lei, who added that the company clocked an income of 31.6 billion yuan (US$5.18 billion) in 2013, up 150 percent from the previous year. He previously said the Beijing-based handset maker was forecast to hit revenues totaling 100 billion yuan (US$16.38 billion) by 2015. 

Xiaomi's product portfolio currently includes televisions, set-top boxes, and mobile phone accessories. The company has over 4,000 employees, including Hugo Barra, who was Google's former vice president and hired to lead Xiaomi's global expansion.

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