Alibaba (BABA, Financial), the Amazon (AMZN, Financial) of China, is doing brisk business with the new iPhone in its store as millions of Chinese lineup to get an experience of the American tech marvel Apple (AAPL, Financial). The new iPhone costs even more than a massage sofa but still there is no dearth for its takers. This is what I call "the casting of Apple spell." In our article titled "IPhone 6 Unsettles The City Roads"Ă‚ we had brought to you the story of how the launch of the new Apple iPhones in the stores sent the Apple buyers berserk on the street on when the new iPhones hit the shelves in U.S.
The picture doesn’t seem to change much excepting now this is about the Apple frenzy in China a new country. Even though Xiaomi is an indigenous smartphone of China but still the fanfare for Apple products and in particular the iPhones does not seem to die out irrespective of the country. This is the truth evolving from the smart work of Apple’s branding team.
iPhone’s number game in China
In last earnings call of Apple, CEO Tim Cook said 20 percent of iPhone purchases in Greater China comprising of mainland China, Hong Kong and Taiwan are subsidized, which means the customer's mobile carrier covers part of the cost of the device — the standard system in the U.S. as well. That means 80 percent of people getting iPhones in China pay full price without any service provider contract
In China the iPhone 6 costs 5288 yuan as per current conversion rates which is about $864 at the Apple store. A price which is much higher when compared to the most popular Chinese smartphone Xiaomi which sells for one third the cost of an iPhone. Yet the iPhone frenzy is gripping China far and wide. iPhone sales in China are up by 32% from compared to last year and this was the number reported even before the iPhone 6 touched the Chinese soils. I am sure with the new iPhone hitting the stores the sales meter must have skyrocketed.
"When I look at China, I see an enormous market where there are more people graduating into the middle class than any nation on Earth in history, and just an incredible market where people want the latest technology and products that we're providing," Cook was quoted saying. "So we're investing like crazy in the market."
Cook however did not disclose the sales number churn during the iPhone 6's opening weekend in China — and expressed that he was very much optimistic about the future of Apple and especially the new iPhones in China. The chief executive officer also acknowledged that there are regulatory pressures on subsidies that could discourage those 20 percent of buyers from getting a new iPhone. The government told its state-run carriers this year to cut spending on marketing and subsidies. China Mobile (CHL, Financial), the largest operator in China, recently included the iPhone on its list of mobile devices but, with the government directives under way, was quick to respond by encouraging other mobile devices on its network. But will this really be able to dent the Apple fanfare? Because if we look at the appeal that Apple has among consumers worldwide, it is larger than any government irrespective of the nation.
The latest Chinese subsidy crackdown seems likely to make the sales of iPhone and Samsung (SSNLF, Financial) smartphone lineage an uphill task in China. But as the world’s premiere phone maker is known for its proactive measures, Cook has declared that they are doubling the number of stores across greater China. Currently the number of Apple stores dotting across China stands at just 15. Apple has also set a target of taking the store count across China to 40 in the next couple of years. Taking cue from what we had mentioned in the earlier part of the article, that 80% of iPhones are sold upfront without any contract or subsidy in China, the recent subsidy crackdown does not seem to be a major threat for Apple as they can easily stretch the contract less purchaser’s count from 80% to something close to 100% with a bit of marketing bid taking into account that the majority of the population demography of China is moving into urbanization.
The next quarter results of iPhone sales in China will give the best evidence of Apple’s popularity in China which will also reflect the sales number of iPhone 6 and iPhone 6 Plus in China. As of now the spirits at the Apple camp in China are at all-time high.
Last word
Going by the current data whatever might be happening the new iPhones look poised to sweep the Chinese market as well as it had done elsewhere across the globe. Even with all the crackdowns and measures under way, Apple enthusiasm looks undeterred. Furthermore the Apple management team looks all geared up to step on the gas to propel their marketing bids across the world and capture more fanfare for the iPhone 6 and the iPhone 6 Plus. This will certainly add more colors to Apple’s revenue and earnings.
As of now it would be best to wait for the next quarter numbers to find out how the new iPhones perform elsewhere across the world apart from the U.S. and rush to take positions in the company accordingly.
