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Apple Inc's China moment still frustratingly out of reach after weak iPhone sales

Jan 29 2014, 12:19 IST
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Apple and China Mobile struck their deal in December, and iPhones went on sale in January. Apple and China Mobile struck their deal in December, and iPhones went on sale in January.
SummaryApple Inc may have to wait a little longer for its watershed moment in China.

Apple Inc may have to wait a little longer for its watershed moment in China.

A disappointing March-quarter revenue forecast, coupled with surprisingly weak holiday iPhone sales, suggest pundits may have over-estimated initial demand from China Mobile's 700 million-plus subscribers, a key factor that has pushed its shares 18 percent higher in the fourth quarter.

It raises doubt about the country's appetite for its devices as well as broader concerns about flagging global demand for smartphones and tablets.

Apple and China Mobile struck their deal in December, and iPhones went on sale in January.

The China Mobile deal, which some analysts expected could boost iPhone sales by as much as 30 million units a year, won't be the knight in shining armour that Apple needs to maintain high growth rates, if its own forecasts are anything to go by.

Despite both companies trumping up the deal as a milestone, the iPhone's lofty price tag - starting at about $740, about a tenth of the average urban income of $7,600 - insufficient high-speed 4G wireless coverage, and persistently stiff competition from local players such as Huawei and Xiaomi may keep a lid on iPhone sales growth for now.

Would-be iPhone buyers may also be waiting for the next iteration, which is widely rumored to adopt the larger screens that Samsung Electronics and other rivals have proved can be more popular with Asian buyers.

"I don't really expect China Mobile is going to sell a lot of iPhones this generation. The other carriers have been selling the device for three months," said CK Lu, a Taipei-based analyst with Gartner.

"But the next generation, if it has a bigger screen, will have a truly huge impact on the market."

Apple declined to comment for this story.

THE GREAT RAMP

China is one of Apple's few remaining geographical areas for growth, alongside Latin America and other emerging markets, with the U.S. and Europe now thoroughly saturated with smartphones.

The company sold 51 million smartphones globally over the holidays - far fewer than the average 55 million expected. That underscores Apple's increasing need to secure sales in China, a market where the majority of mobile users still get by with cheap feature phones, but where the Cupertino company commands a paltry 6 percent market share, according to Canalys.

But the market is also a huge unknown. Some analysts fear that China Mobile may simply end up cannibalizing its rivals, China Unicom and China Telecom, yielding little meaningful

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