Expectations management

Apple underwhelms Chinese with launch event for new iPhone


Still not cheap enough: iPhone 5C

What a non-event! After the feverish rumours in advance of Apple’s product launch event in Beijing this week, Apple-watchers couldn’t help but feel disappointed.

When Apple confirmed that it was hosting a media event in Beijing on Wednesday, it immediately raised hopes that an announcement on a partnership with China’s largest mobile telco provider was imminent (in fact, there were rumours that chief executive Tim Cook would ditch the event in Cupertino to be present in Beijing). There were also forecasts that a new, cheaper ‘Made for China’ targeted iPhone would be unveiled.

But by Wednesday afternoon, there was still no announcement about a deal with China Mobile, while the new iPhone 5C was not deemed cheap enough.

Indeed the event in Beijing proved bizarre. Journalists expecting some razzmattaz were stunned when Apple merely replayed the video of the earlier US launch event. “Apple has indeed done something remarkable – they have managed to piss off every media outlet in China,” a local tech blogger wrote.

The only real ‘surprise’ was a negative one, as far as most analysts were concerned: that the new iPhone 5C (the “cheaper” iPhone) still isn’t affordable for most Chinese consumers.

Finished in cheaper materials, including colourful plastic casings, the iPhone 5C is priced at about Rmb4,488 ($734) without carrier subsidy in China. That is still too high for most price-conscious buyers, Apple’s critics contend (and it’s also much pricier than in the US, where the same handset costs $549). “At this price, Apple won’t be targeting cost-conscious consumers in China,” said Nicole Peng, a Shanghai-based analyst for telecom research firm Canalys.

The reception on weibo has also been lukewarm at best, despite Apple’s new products featuring as the most talked-about topic on Sina Weibo on Wednesday.

“Who spread the rumour that the 5C is going to be cheap?” one netizen grumbled. “Even though I’m not an Apple fan, the new products are a bit disappointing. The features for the new iPhone 5C and 5S are not that innovative. Especially the 5C: it’s just a plastic iPhone 5 with a plastic case. No wonder the share price dropped 6% after the announcement,” another internet user wrote.

Still, it appears that the trips that Cook has taken to Beijing weren’t completely futile. That’s because the iPhone 5C will be available in China on September 20, the same date that it becomes available in the US and the UK (previously Apple has faced delays for its product launches in China due to regulatory hurdles). Two of Apple’s current carrier partners – China Unicom and China Telecom – have also said they will carry the newest iPhone models within days of their launch.

But Apple investors were hoping for more positive news from China. In the most recent quarter, it reported that “Greater China” revenues (which include Hong Kong and Taiwan) fell 14% from the same period a year ago. They were also down a whopping 43% from the previous quarter. Apple’s China smartphone share also fell to 5%, ranking it seventh behind market leader Samsung, which had 18%, according to data from Canalys (see WiC205).

Small wonder, then, that Apple is being accused of doing too little to stem its decline in the Chinese market.

A distribution deal with China Mobile might reverse the negative sentiment and boost iPhone sales. And the long-awaited partnership could still be on the cards: the Wall Street Journal has reported that Chinese regulators have approved licences necessary for the iPhone to run on China Mobile’s network.

“Apple carries enormous cachet in China and the bulk of these high-end subscribers remain with China Mobile due to the lack of mobile number portability,” HSBC analyst Tucker Grinnan wrote on Tuesday, adding that distributing the iPhone will allow China Mobile to raise revenue and retain high-end customers.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.