China Mobile has recently signed a deal with Apple to bring the iPhone to China’s largest network. The agreement creates a great opportunity for increasing sales of the iPhone without disrupting the companies pricing model. China Telecom and China Unicom, two of China’s smaller networks already support the iPhone but China Mobile, the world’s largest mobile network, is a major step in selling the handset to Chinese customers on a large scale.
The Chinese smartphone market is one of the largest untapped markets for smartphone manufacturers. If the launch of the iPhone coincides with China Mobile’s unveiling of its 4G network next month an additional 1.5 million iPhones per month in sales could be realized, with about 20 million additional iPhone activations in 2014. Android derivatives hold 60% of the install base compared to iOS’ 18% share on the network. The iOS growth is coming from the low end of the marketplace and only one Android manufacturer, Samsung, is a non-Chinese vendor -- of the top ten in China.
“Android’s steady growth in China is mainly coming from cheaper local brands, consumers are seeking for the ultimate value for money device,” says Kantar WorldPanel. Many analysts believed that Apple would promote the 5c as a cheaper model to compete against the low-end Android handsets. However, Apple replaced the iPhone 5 with a similar handset that had a lower build cost. This allows Apple to maintain their traditional price points and margins.
Even without lowering the retail price, there is already a strong demand for Apple handsets in China. Previously, Chinese consumers have had to turn to the grey market, which was a source of worry and friction for customers looking to buy an iPhone. The partnership with China Mobile reduces these concerns. It also benefits China Mobile by giving it a handset with high margins just in time for the Chinese New Year. Apple benefits with significant reach for their mobile platform and a new sales channel.
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