Apple Gets iPhone License for China Mobile Network - Wall Street Journal

BEIJING—Apple Inc. on Wednesday hosted its first-ever iPhone product introduction in Beijing and gained approval to offer the device with China's largest carrier, indications of how important the world's largest smartphone market has become for the Cupertino, Calif., company. But critics were disappointed by the minimal difference in price for the iPhone 5C—the less expensive of the two phones Apple unveiled—signaling that Apple will continue to target the top end of the Chinese market. While that means Apple likely will retain its profit margins here, analysts worried it would come at the expense of gaining ground in a huge market that is shifting toward less-expensive phones. Priced at 4,488 yuan (US$733) in China for the unsubsidized, 16-gigabyte version, the iPhone 5C is unlikely to attract customers beyond the affluent in China's largest cities. Apple has maintained a strong share of the market for high-end smartphones in China, but its portion of the broader market has dropped as consumers have bought less-expensive devices from Chinese companies and South Korea's Samsung Electronics Co. Apple's China market share fell to 5% in the second quarter. That ranked the company seventh, behind domestic manufacturers such as Lenovo Group Ltd., according to research firm Canalys. Samsung was No. 1 with 18%. "At this price, Apple won't be targeting cost-conscious consumers in China," said Nicole Peng, a Shanghai-based analyst for telecommunications research firm Canalys. Unless Chinese carriers offer special subsidies that lower the phone's upfront cost, the 5C is unlikely to broaden Apple's customer base as much as many analysts had expected, Ms. Peng said. Apple declined to comment on its pricing strategy. The company's shares were down 5.8% Wednesday morning, following a 2.3% decline Tuesday, after several brokerage firms downgraded Apple's stock. China's Telecom Equipment Certification Center on Wednesday gave Apple the final license necessary for the iPhone to run on the network of China Mobile Ltd., the world's largest wireless operator. The approval marks the imminent opening of a huge new market for Apple. China Mobile has more than 700 million users, but its proprietary Chinese standard has prevented the company from offering the iPhone. China Unicom Ltd. and China Telecom Corp. have sold iPhones for several years. China Mobile didn't respond to a request for comment. Its shares closed at 87.15 Hong Kong dollars (US$11.24), down 70 Hong Kong cents on Wednesday. U.S. carriers provide subsidies to customers to lower the upfront costs of purchasing phones. The 5C will cost US$99 in the U.S. with a two-year contract. But in China, consumers usually pay full price for phones because carrier subsidies kick in later, as refunds that can reduce monthly phone bills. The price of the iPhone 5C drew groans on China's social media, with some users asking friends or strangers to purchase iPhones abroad and bring them back to China. One of the reasons Apple decided to release the phone simultaneously in China, the U.S. and other countries, analysts said, was to maintain the control over service and distribution that the company loses when large numbers of phones are brought here from abroad. In the past, iPhones were released a month or so earlier in the U.S. than in China. A user of Sina Corp.'s Weibo microblog wrote that getting an iPhone was like finding a girlfriend after college—"too many demands and too expensive." Though the phone is likely to sell briskly in China's most affluent cities, such as Beijing and Shanghai, it is less likely to do well in less wealthy, yet large cities like Shijiazhuang. According to three vendors in the city's Hailong Electronics City mall, most merchants will try to get owners of less-expensive Chinese phones to upgrade to the iPhone 5C. But Ma Tao, who owns a shop on the second floor of the mall, said he didn't think the iPhone 5C would fly off the shelves as fast as less-expensive Chinese phones. "Xiaomi phones are 1,500 yuan. They're cheap and they have about the same hardware as more expensive Samsung phones," he said, referring to phones made by Xiaomi Inc., a popular manufacturer that sells phones close to its cost. "If the inside is the same, but [the phone is] 1,000 yuan cheaper, people will choose it," he said. At 1,999 yuan, the Xiaomi model unveiled last week is less than half the cost of the iPhone 5C. Though Apple's event on Wednesday appeared designed to emphasize the importance the company places on China, some people online were cynical. A satirical portrayal of Apple's presentation that used images from the event with wry subtitles spread around social media. The post suggested that the new fingerprint security function on the higher-end iPhone 5S was designed for Chinese men to ensure that their wives don't find out about their affairs. Another comment mocked the gold color for the iPhone 5S. "China is the most important market for our company. You all know China has many rich and trashy people, so we made the iPhone 5S particularly in colors that would appeal to the rich and trashy," a fake subtitle read. –Juro Osawa contributed to this article. via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHJCyLGNEgPIuyQ2MA_aJ4efdwz-g&url=http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-323773/

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