The lower-cost iPhone that Apple is expected to unveil next month could prove the answer to a relatively new problem facing the company: Slowing growth in China.
China is currently Apple’s second-largest market, and CEO Tim Cook said be believes it will someday become the first. But recently the company’s momentum in the region has waned. In Apple’s third quarter, revenue from Greater China – which includes Hong Kong and Taiwan – slipped 14 percent year over year to $4.6 billion. That was a 43 percent decline from the previous quarter, one aggravated by a brutal 20 percent drop in sell-through in Hong Kong.
A sharp drop in revenue for an important region, and troubling, but one for which Apple may already have a solution, in the form of the so-called iPhone C. According to Morgan Stanley analyst Katy Huberty, that iPhone, which is expected be a sort of mid-end version of Apple’s flagship smartphone, could significantly boost Apple’s share of the massive Chinese smartphone market.
Extrapolating from data culled from a survey of 2,000 Chinese mobile-phone owners, Huberty found that Chinese customers consider $486 to be an “acceptable” price range for the iPhone C. (Interestingly, that’s 22 percent more than her $399 estimated price for the device.) What’s more, she predicts that if Apple were to launch the iPhone C in Greater China at that price point or one near it, the company would drastically spike iPhone sales in the region, raising its market share by 13 points. This, at the expense of rivals like Samsung, HTC and Nokia.
And if Apple were to debut the iPhone C in China along with a distribution deal that would finally bring the device to China Mobile – the largest wireless carrier in the world – its share of Greater China’s smartphone market would rise even further.
“Apple would gain six points of market share if it struck a deal with China Mobile, according to our survey,” Huberty said. “Samsung would be the biggest share loser, at 4.6 points, while many other vendors would see slight share losses.”
Now, as Huberty notes, it’s not at all clear that Apple has inked an iPhone deal with China Mobile. Indeed, China Mobile Chairman Xi Guohua said earlier this month that the two companies were still in a “deliberation process” about such an agreement. But it’s clear that both sides are very much interested in hammering one out. So, while that additional market share to which Huberty refers may not be in the near future, it could be in the distant future.
And if Huberty’s assessment of iPhone C demand and the market share gains it could drive is accurate, Apple might even manage to take the smartphone share lead in Greater China, making it the top smartphone player in the world’s most populous smartphone market.