Apple will sell five to seven million iPhones in China in 2010 as a result of its deal with the country's second-largest mobile carrier, a Wall Street analyst said on Friday.
The Chinese market will account for about 15% to 20% of Apple's worldwide iPhone sales next year, said Brian Marshall, an analyst with Broadpoint AmTech. The upside for Apple is great.
Apple and China Unicom announced early Friday a three-year deal to sell iPhone in China, ending months of rumors and speculation about Apple's entry into the Chinese mobile phone market. The initial launch is expected to be in the fourth calendar quarter of 2009.
According to data from research firm IDC, iPhone sales numbers depend heavily on the U.S. market, which accounts for 49% of worldwide sales, compared to 25% for Western Europe, and just 7% for the Asia Pacific region, which includes Australia, Hong Kong, and India.
Analysts believe that entering the Chinese market, which boasts over 685 million mobile subscribers compared to just 270 million in the U.S., could be key for future iPhone sales growth, although sales will likely depend considerably on the subsidy China Unicom provides.
Xiang Ligang, CEO of the Chinese telecom news publication cctime.com, estimates 100 million Chinese mobile users switch phones every year, with 20 million of those purchasing high-end mobile phones, representing a large potential market for Apple.
China Unicom has about 70 million post-paid customers -- the kind that Apple wants - while China Mobile has approximately 92 million post-paid customers, Marshall estimated.
The close numbers possibly helped Apple make the decision to go with China Unicom, he said.
China Unicom's 3G network, a necessity for the iPhone and the only one of the three state-sanctioned carriers' that is compatible with the iPhone, will be in place by the end of the year, said the company's chairman and CEO, Chang Xiaobing, during a news conference on Friday.
140 million subscribers, less than a third of the 460 million subscribers of China Mobile, the nation's largest mobile provider, said Marshall. Nonetheless, the No. 2 carrier in the country was still of interest to Apple, he added.
Under the three-year deal, China Unicom will start selling iPhones in the fourth quarter of this year.
With 70 million post-paid customers, and assuming flat sales, which are conservative, I think Apple will sell between five and seven million iPhones in China during 2010, said Marshall. He projects that Apple will sell 37 million iPhones worldwide in 2010.
That means China will account for 15-20% of all iPhone sales next year, said Marshall, rounding up the actual numbers of 13.5-18.9% generated by his math.
Standard & Poor's analyst Clyde Montevirgen gave similar prediction today that Apple could sell more than 4 million iPhones in China in calendar 2010. Montevirgen also raised his target price on Apple to $200 from $175, while lifting his EPS estimate for the September 2010 fiscal year to $6.78, from $6.65, at the news of Apple's iPhone deal with China Unicom.
China Unicom did not spell out its iPhone pricing, but Chairman and Chief Executive Chang Xiaobing told reporters that it would be competitive.
Unicom said it bought the phones in a bulk purchase from Apple, and would not use Apple's traditional revenue sharing model, but did not offer any details.
The phones reportedly include iPhone 3G and iPhone 3GS, without Wi-Fi function though. China Unicom predicted it would eventually secure a third of China's 3G market share, but did not provide a timeframe.