With the announced updates to iOS 6 to include "New Features for China", Apple (AAPL) is clearly making a big push into the huge market. Rumors have been circulating for some time that China Mobile would finally get the iPhone officially. I want to map out and explain my prediction that Apple will move China up to the top tier of its launching schedule for the new iPhone.
iOS 6 Mini-Focus: China
Apple's been criticized for a slow move into China. From a growth perspective, they've got to go there in a big way. iOS 6 adds a slew of features for China. These additions are one of the 12 main points Apple makes about the new OS on its own site. No other country or language is mentioned.
The next iPhone will debut with the new OS. While most of Apple's current iDevices will easily upgrade to 6, it would be an impressive move to add China to the list of launch locales along side the OS.
Without Compromising On Price
China Mobile wants the iPhone and Apple wants to get the iPhone into the hands of the largest customer base on earth (667 million). It's already been suggested the next iPhone will support their TD-SCDMA 3G network from the start.
While China Mobile needs to offer the iPhone to grow its 3G base, one can imagine they're still able to use their huge size as a hold out for "something" from Apple. Apple can't compromise on price without upsetting margins and agitating investors.
While Apple hasn't played the exclusivity card for a while in the US, they do use it in China with their tiered roll-out schedule. In lieu of compromising on price, gifting exclusive rights to China Mobile for the iPhone 5 launch could be the bargaining tool they need.
Availability is always a problem with iPhone launches. They just can't make enough. At least one analyst is already predicting a 50 million iPhone quarter following the next release.
We're already expecting Tim Cook to orchestrate a modern marvel of engineering and supply chain management with the next iPhone's release.
But getting a deal done with China Mobile in an exclusive fashion would help limit the initial production needs. Since Apple staggered the iPhone 4S rollout in China, adding China Mobile as a new carrier with initial exclusivity could fit the pattern.
China Mobile's exclusivity could be limited to the launch and last 3 or 4 months. Orders would be taken online to avoid the mad-rush issues of releases past and shipping time estimates would likely rise quickly due to limited quantities at release.
The Production Timetable Importance
I've seen conflicting reports on when production for the new iPhone began. If production started in June, Apple has a month longer to produce iPhones before the launch.
In previous articles, I've stated my case for an early September iPhone launch. Assuming a June production start, 3 1/2 months of production time would occur before shipping the first phone in late September. If they actually started in July, there's significantly less time to build up stock for this massive launch.
Political And Social Importance
By conducting a simultaneous launch, Apple could send an important signal to both the Chinese consumer market and political structure. Apple wants a strong relationship with the country and people that both produce its products and, by nature of population, have the largest mobile base to consume them.
Cook was in China as recently as March, meeting politicians and shaking hands. This would have a been an opportune time to wrap up negotiations with both the government and China Mobile for a fall launch.
It's Too Quiet
In May, a short time after Cook's visit, China Mobile Chairman Xi Guohua confirmed the two companies are talking and that they want to do something together. There's been little from anyone about it since then.
We should expect to hear nothing about it. Cook noted at D10 "We're going to double down on secrecy on products." With all the moving parts, it may be hard to keep iPhone covers out of the hands of the masses, perhaps keeping this type of deal secret isn't as hard.
The iPhone 4S launched on its first carrier in January, 3 months after the US. The timing of the statement in May could indicate something sooner, rather than 8 months or a year later.
It would make sense, as well, that China Mobile would be the first Chinese partner. China Telecom just received the current phone just 3 months ago in March while China Unicom started selling it 7 months ago in January.
The Certification Tell
One concern for secrecy may be the certification process for the next device in China. Apple received certification for the new iPad in May, almost 2 months before it's to go on sale. It is possible they could have moved faster but were holding out on the trademark settlement for the iPad name, which was announced on July 1st.
I'd imagine the certification could be done in closer proximity to the phone's release date; perhaps even between the announcement and release. That would be an important requirement given the value Apple would place on keeping it secret. I don't know enough to say for sure and I invite readers to comment on this topic.
Given the growth and size of China, sooner or later, Apple has to start launching products in the market with the same gusto it does here in the US.
Connecting the points above, it's logical for Apple to start to include China sooner, rather than later. There's no hard evidence to either confirm or dismiss the possibility that the iPhone 5 launch will be the one. If it does happen, there's certain to be many revisions to the coming quarterly estimates.
Additional disclosure: In addition to owning AAPL stock long, I own a variety of call options with expirations between July '12 and January '13. I may add to or reduce my positions at any time. I have no inside information. My predictions are based on the analysis of publicly available information. I've included many links to example sources. Use the opinions expressed in this article at your own risk. I could be completely wrong.