Apple (AAPL) Disappoints In China With Launch Event Of Expensive iPhone 5C And No Partnership With China Mobile (CHL)

 @SophieXSong
on September 11 2013 11:21 AM
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Journalists watch a screen showing the new iPhone 5C in different colours at Apple Inc's announcement event in Beijing, Sept. 11, 2013. REUTERS/Jason Lee

Apple Inc. (Nasdaq:AAPL) isn't very popular in China today: The Beijing launch event for its iPhone 5C showed a recording of the Cupertino, Calif., event; though billed as affordable, the latest Apple phone is still pricey for the Chinese market, and a partnership with China Mobile Ltd. (NYSE:CHL) remains to be confirmed. 

Maybe Apple shouldn’t have hyped its Tuesday-night launch event in China, because it proved a disappointment in many ways, and the Chinese government isn’t likely to help out the company by censoring negative comments online.

The anticipated partnership between Apple and China Mobile was not announced at the event (to be fair, nothing much was announced), but it seems imminent, as China gave the license necessary for iPhones to run on China Mobile’s networks for third- and fourth-generation cellular services, according to the Wall Street Journal. A deal between the two companies would mean, theoretically, 700 million potential customers for the iPhone.

But in reality, only a small share of those China Mobile consumers may be up for paying Apple’s prices. Subsidized by carriers in the U.S., an iPhone 5C could cost as little as $99, while the same phone will be sold in China for 4,488 yuan ($735) – a big price tag for something that looks like a “potato peeler,” quipped Weibo user @英国那些事儿.

“It’s not cheap enough,” Tucker Grinnan, a Hong Kong-based analyst with HSBC Holdings PLC, said of the iPhone 5C in an interview with Bloomberg Television on Wednesday. “We are disappointed with the price point. It is a high-end phone in China.”

Grinnan added that he had anticipated that new iPhones would cost between 2,500 and 3,000 yuan.

Indeed, China’s domestic brands Lenovo Group Limited (HKG:0992), ZTE Corporation (SHE:000063) and the new media darling Xiaomi Corp. have offered up a number of smartphones all costing much less than the iPhone. Xiaomi’s newest handset, for example, costs 1,999 yuan, according to Bloomberg.

Apple has made about $25 billion in the past four quarters in China, but sales fell 14 percent last quarter. A low-cost model would have helped the company boost sales in rural areas, but it looks like Apple’s pricing strategy will not change just yet, and its customer base is not likely to expand as much as some expected. What remains to be seen is whether the carriers will offer subsidies to make the phones more affordable, the Wall Street Journal reported.  

Even before the China event, Chinese Apple enthusiasts were already taking to Weibo, China’s Twitter-like microblogging platform, to complain about the high prices of the new iPhones, the gaudy colors and the low specs of the 5C.

After the exclusive, invitation-only China event, which none of the Apple executives attended, the Chinese went wild on Weibo, expressing their discontent with the company. At least they always have a sense of humor when lashing out.

“If you collect all five colors [of the iPhone 5C], you can successfully summon Jobs,” one Weibo user, @早晨的闹钟 wrote.

“A bunch of reporters sat there and watched the recording [of the American Apple event]! Apple didn’t even prepare snacks, how sad,” @互联网的那点事 wrote.

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