Feng

Apple's Chinese iPhone Torture

Paul,

You raised a great point, I agree it's important for any phone manufactuerer to maintain a good relationship with China Mobile. However, I would argue Apple's approach looks even more stupid from that perspective. Because you give CHL incentive to build good relationship, yet Apple is trying to get CHL to pay them.

Whoever is in charge of Apple's China strategy should be fired immediately, if not 1 year ago. This guy clearly had no understanding of the Chinese market and consumer behavior at all. I want to reemphasize my belief that had Apple launched the iPhone simulaneously in China and US (full price in China, say $700 and subsidized price in the US), Apple was very likely to achieve bigger sales (in terms units shipped) in China than in US. Because Chinese consumers are so much more trendy than the average US consumers and they do love iPhone. Now it's too late because the unlocked phones has already flooded the market at a price of roughly $600 for the 8G version.

I used my own experience to illustrate the point that Chinese consumer are willing to pay a much large % of their income on trendy cell phones in my previous post. Another example, a friend of my sister is asking my to buy a Sony Erisccon X1 phone for her. The phone cost $720 here and is still not available in China. $720 is close to her salary for 1/2 to 1 month. This is not uncommon for Chinese consumers. Of course, I have not done thorough research to support my point that Apple will sell very well at unsubsidized price, but it's very clear to me Apple has missed the key point completely.

As an iPhone lover (love my wife's iPhone much more than my BB to the extent I placed a pair trade on AAPL and RIMM last month, :P) and shareholder, I sincerely hope Apple learn from this mistake.

Apple's Chinese iPhone Torture

Apple has completely mis-gudged the situation in China.

1) They missed the boat in a big way. Even if they sell iPhone at the un-subsidized prcie, say $700, iPhone would still be a big sell in China if they launched it early, possibly bigger than in the US. Yes Chinese consumers are on average much poorer, but the urban people have decent income. More importantly, average Chinese consumer are much more trend conscious than US consumers, it's very common for them to spend a month's salary on a phone. That's what I did when I was a graduate student in China 8 years ago. Now I live in the US, I don't even want to spend 1/10 of my salary on any new cell phone. A key difference is peer pressure.

2) They hold no card in negotiation with China Mobile. China Mobie has such a strong market position, why would they want to give Apple money just to get their users to use this phone? And anyway user can buy the unlocked phone in China as the other comments reveals. Additionally, consumers in China are not used to have a subscription plan.

My suggestion to Apple: stop negotiation with any carriers in China, just start sell your iPhone in China directly. You've missed the boat this time because iPhone is not as hot as it was 2 years ago. But next time, when you come up with new things. Set the price 2X what an unsubsidized price would be in the US in China. It will sell.