Apple used to make its China fans wait three months to get the latest iPhone. Now the company can't afford to leave them behind.
For the first time, Apple will release its newest handsets in China on the same day as the U.S., Europe and Japan. The iPhone 5s and lower-cost 5c go on sale tomorrow in Apple's 11 stores in China and Hong Kong as the company tries to boost sagging market share in the world's most populous nation.
Apple Chief Executive Officer Tim Cook, looking to reignite growth after a year of not releasing any new products, is counting on iPhone customers in China to give it a fresh boost. That goal will be challenged by a diminishing technology edge versus Samsung Electronics Co., a slew of more affordable devices from local phonemakers and the lack of a distribution agreement with China Mobile Ltd., the biggest carrier.
"The iPhone is too expensive for me, I could never afford it," said Li Guang, 25, a department-store clerk in Beijing. "If I were buying a smartphone for myself, I'd never spend more than 3,000 yuan."
The lowest-priced iPhone 5c, with a plastic shell coming in five colors, will sell for 4,488 yuan ($733), almost equivalent to two months' pay for a typical urban worker, based on figures from the National Bureau of Statistics.
Li, who uses a secondhand iPhone 4S passed down by a friend, has no plans to upgrade to the 5c or 5s, she said while taking a smoking break from luggage shopping at Beijing's 77th Street Plaza.
That sentiment concerns investors in the Cupertino, Calif.-based company, which saw its market share in China cut by almost half in the second quarter, dropping it to seventh place. Apple's stock fell 8 percent in the first five trading days after the prices of the new iPhones were disclosed.
"We never had an objective to sell a low-cost phone," Cook said in an interview in Bloomberg Businessweek's Sept. 23 issue. "Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost."
The weaker interest from consumers like Li is a sharp turn from January 2012, when angry buyers threw eggs at Apple's store in Beijing's Sanlitun district after it failed to open on time for the first day of iPhone 4S sales. That handset was released in China three months behind the start of U.S. sales in October 2011.
The iPhone 5 came to China in December 2012, three months after its September 2012 release in the U.S.
Cook visited China at least twice this year and said the country will overtake the U.S. as its largest market. While sales in the country fell 14 percent to $4.6 billion last quarter, China is now Apple's third-largest region by sales, after the Americas and Europe.
A few years ago, sales in the country totaled only "hundreds of millions" of dollars a year, Cook said in July.
Kitty Potter, a Beijing-based spokeswoman for Apple, declined to comment on demand for the new iPhone models.
A challenge for Apple is that 80 percent of smartphone shipments in China in the second quarter were priced below $400, said Jessica Kwee, a Singapore-based analyst with researcher Canalys. Apple trails Samsung and domestic vendors Lenovo Group, China Wireless Technologies Ltd.'s Coolpad, ZTE Corp., Huawei Technologies Co. and Xiaomi Corp.
Xiaomi's newest handset costs 1,999 yuan, and Lenovo's flagship K900 IdeaPhone sells for 3,299 yuan.
"The new devices are not likely to widen the iPhone's mass appeal" in China, Kwee said. "The unsubsidized price of the new devices is too high for mass adoption."
Apple still has a big opportunity by appealing to more wealthy customers in China, said Carl Howe, an analyst at Yankee Group in Boston. Many Chinese consumers view the iPhone like owning a luxury car and will pay the premium, he said.
"A lot of us in the West underestimate just how big the affluent Chinese market is," Howe said. "Even though China has a lower percentage of wealthy individuals than here in the West, the absolute number of affluent Chinese who can afford an iPhone is still higher than a country like the United States."
Subsidies from Apple's two carrier partners in China, China Unicom (Hong Kong) Ltd. and China Telecom Corp., can help make the devices more affordable, and on some plans even provide free handsets.
Even so, Apple isn't getting the same support from Chinese carriers that it enjoys in the U.S., where companies like AT&T Inc. and Verizon Wireless offer the iPhone 5c for as little as $99 to entice customers to sign up for a two-year contract. That backing has helped make the iPhone the top-selling smartphone in the U.S., according to ComScore Inc.
In China, wireless carriers are looking to rein in costs from adding new users. China Telecom, the third-largest wireless company in China, requires customers to make a down payment for the cost of the handset: 4,488 yuan for any plan with a 16- gigabyte iPhone 5c, and 5,288 yuan for the iPhone 5s, according to the company's website. Portions of that payment are given back in monthly installments depending on the contract, meaning a customer still needs to come up with the cost of an iPhone.
With a monthly plan costing 289 yuan for two years, the China Telecom subsidy works out to 2,890 yuan, or 15 percent less than the previous model on the same plan, according to Eva Yip, a Hong Kong-based analyst at Sun Hung Kai Financial Ltd.
By releasing the iPhone on the same day in China as other countries, Apple may also shrink demand for the so-called gray market, when people would take advantage of the sales lag by purchasing iPhones or iPads in the U.S. and then selling them in China. In previous Apple releases, lines in the U.S. were crowded with shoppers who said they had been hired to purchase devices that would then be resold in China.
Apple's best chance to boost sales may come from the world's largest carrier by subscribers. Apple is near a deal with China Mobile to distribute the iPhone, a person familiar with the talks has said. That would open up more than 745 million new potential customers for Apple.
Until then, Apple will have to hope for a change of heart among diehard fans like Chen Lang, who said he can't afford to upgrade to a 5c or 5s right now. Chen, a 24-year-old who just started working at a car dealership, said he plans to keep using the iPhone 4 he bought two years ago.
"I'm at a point where I need to be saving money," Chen said outside Apple's Joy City Mall store in Beijing's Xidan shopping district. "When it does come time to replace it, I'll stick with Apple."
Apple used to make its China fans wait three months to get the latest iPhone. Now the company can't afford to leave them behind.
- Z_CNHI News Service
Lean Cuisine sales drop as consumers shun freezer
Nestle's Lean Cuisine is being hit by concerns that the low-calorie frozen dinners it pioneered are unhealthy and too expensive, a lethal one-two punch for a product targeted at budget-conscious dieters.
Early signing changes calculus of college football recruiting
What high schooler wants to spend a senior year worrying about where they'll go to college? And what college coach wants to endure the headaches of National Signing Day if they can nail down their top prospects in the fall?
Both genders think women are bad at basic math
A study of how both men and women perceive each other's mathematical ability finds that an unconscious bias against women could be skewing hiring decisions, widening the gender gap in mathematical professions like engineering.
Who belongs in the delivery room?
Should a father be allowed in the delivery room for the birth of his child, over the mother's objections? A New Jersey judge said no last November, in a ruling that was released in writing earlier this week.
Americans in poll don't believe Christie or Clinton
Americans aren't buying the explanations offered by Chris Christie and Hillary Clinton about controversies that could stand between them and the White House if either runs for president in 2016.
VIDEO: Two dead at SXSW after car hits crowd
A suspected drunken driver fleeing police crashed through barricades at the South By Southwest festival in Austin, slamming into a crowd outside a nightclub and killing a man and woman on a moped early Thursday, police said.
VIDEO: Wild car chase in Denver
Denver police apprehended a man who led them on a wild chase in three different stolen cars Wednesday after a four-year-old boy was reportedly kidnapped from a gas station.
Missing Malaysian jetliner confuses a world that's online 24/7
The disappearance five days ago of a Malaysian Airline Systems Bhd. aircraft with 239 people on board is confounding search teams and a global audience used to around-the-clock connectivity and real-time updates.
Which foods are the worst for the environment?
As with most arguments about our food supply, though, it's not that simple. Although beef is always climatically costly, pork or chicken can be a better choice than broccoli, calorie for calorie.
Old Spice attracting women in gender-bending win for P&G
Young women are embracing Old Spice - long known as the brand dad kept in the medicine cabinet - even as P&G's marketing continues to focus on their male peers.
VIDEO: Aftermath of NYC building collapse
Footage from the New York Daily News shows firefighters responding to a building collapse at East 116th Street and Park Avenue in Harlem. At least 11 minor injuries had been reported late Wednesday morning.
VIDEO: Double leads to runaway stroller at spring training game
A fan at a recent Marlins-Mets spring training game in Port St. Lucie was so intent on snagging the ball from a ground rule double by Chris Young that he forgot to hang on to the stroller carrying his young son, which then careened down a hill.
If you were a crustacean, would you feel pain?
A scientist and a seafood chef walk into a bar. "We have a mutual interest," says the scientist. "I study crustaceans and you cook them." But the chef wanted to know just one thing: Do the animals feel pain?
Kentucky's imperfect season shows one-and-dones have lots to learn
Despite recruiting the nation's top freshmen class, John Calipari and the Kentucky Wildcats fell far short of expectations this year. Their under-achieving season proves the importance of cohesion and chemistry - not just talent - in college basketball success.
How virus sleuths and public health officials track the cause of a mysterious illness
When a mysterious disease fells people - as happened in California recently, with as many as 20 children experiencing unexplained paralysis - teams of physicians and epidemiologists quickly mobilize. Perhaps you saw the movie "Contagion"? The idea is to find the culprit before it spreads but also to prevent public panic.
First Apple, now Google hit with kids' app lawsuit
Last month, 4- and 5-year-old brothers in New York quickly spent $65.95 in real money to buy virtual goods in Marvel's Run Jump Splash game on the family tablet. They were able to rack up the charges without entering a password. And for that, the boys' mother has joined a class-action lawsuit filed Tuesday against Google, accusing the company of deceiving consumers about its in-app purchase system, which critics say makes it too easy for kids to spend money on their Android devices.
VIDEO: First month of Colorado pot legalization brought in $2M in tax revenue
The first month of recreational marijuana sales in Colorado brought in about $2 million in tax revenue, the first indicator of the earning potential of the U.S.’s premier legal pot market.
VIDEO: NHL game postponed after player collapses
Monday's game between the Columbus Blue Jackets and the Dallas Stars was postponed after Stars forward Rich Peverley collapsed on the bench shortly after completing a shift in the first period.
VIDEO: Family rescued from ferocious feline
A family in Portland, Ore., called 911 after their pet cat scratched their son and "went over the edge," forcing them to take refuge in a bedroom.
In this tech age, how can a plane go missing?
Call 911 from the side of the road, and GPS satellites can tell dispatchers exactly where to send help. Airline passengers have access to detailed maps that show exactly where they are during their journey. Hop onto WiFi, and somehow Google knows whether you're logging on from Lima or London, and will give you detailed suggestions about what to eat.
VIDEO: Skydiver, pilot treated after midair collision
A pilot practicing take-offs and landings got tangled up with a skydiver in Polk County, Fla., but amazingly, no one was seriously hurt.
Researchers tackle mystery of how some snakes can fly
Flying snakes sound like creatures from a bad B-movie, but these serpents are elegant gliders that have evolved a special skill that sets them apart. In two new studies, engineers have used simulations to try to decipher how the wingless reptile manages to remain airborne despite its lack of flight appendages.
Holder: Heroin deaths an 'urgent and growing public health crisis'
Attorney General Eric Holder, calling the rise in deaths from overdoses of heroin and prescription painkillers an "urgent and growing public health crisis," is outlining a series of efforts by the Justice Department to combat the epidemic.
Most deadly fraternity scraps initiation for new members
Sigma Alpha Epsilon, one of the largest U.S. fraternities and the deadliest, said Friday it will ban the initiation of recruits, citing the toll that hazing has taken on its newest members.
VIDEO: Michigan woman's death, mummified body hidden by auto-pay for six years
The mummified body of a Michigan woman was discovered in the backseat of her car approximately six years after her death. The body was only found after the bank that foreclosed on the home ordered work on the property.
VIDEO: Chrysler orders community college to crush rare Dodge Viper
Students at a community college in Washington are fighting to save a rare Dodge Viper given to them by the Chrysler Corporation. The company now says it must be destroyed for legal reasons.
Giving businesses choice is not legalizing discrimination
The owner of a California gay bar should be allowed to refuse service to legislators he considers "crazy, ignorant or stupid." The problem is the popular double-standard that supports his version of "discrimination" while raging against anyone who disagrees with him but wants the same freedom.
VIDEO: Penguin sweaters save birds trapped in oil spills
A wildlife group in Australia is inviting volunteers to knit sweaters for the penguin population it conserves, because it says the sweaters can actually save the lives of birds caught in oil spills.
VIDEO: Kentucky AG holds back tears, announces he won't defend marriage ban
In a tearful statement that went viral this week, Kentucky Attorney General Jack Conway announced that he would not defend his state's ban on gay marriage in court. Conway made the announcement after a federal judge ruled that Kentucky must recognize same sex marriages performed in other states. However, Gov. Steve Beshear said he will hire private attorneys to appeal the judge's order.
Staples to close 225 stores as online competition hurts sales
Staples Inc., the largest U.S. office-supplies chain, will close as many as 12 percent of its North American stores and cut as much as $500 million in costs as online competition continues to hurt sales.
- More Z_CNHI News Service Headlines
- Lean Cuisine sales drop as consumers shun freezer