According to a new report from KGI Securities analyst Ming-Chi Kuo, the deal may have been slowed by the unexpectedly weak demand for the iPhone 5c relative to the iPhone 5s among China Mobile customers. According to Kuo's survey numbers, interest in the iPhone 5c from China Mobile customers has fallen precipitously from earlier expectations while iPhone 5s interest has remained high, and that unexpected mix of customer preference may be leading China Mobile and Apple to a renegotiation of an agreement that was nearly settled.
While previously we estimated that Apple originally planned the TD-LTE version would account for 30% of total iPhone 5C shipments, our latest survey indicates that demand for the TD-LTE iPhone 5C has declined dramatically due to 5S being far more popular than 5C among China Mobile subscribers. As such, we estimate iPhone 5C shipments of the TD-LTE version for China Mobile at 1.0-1.5mn units in 4Q13 and under 1.0mn units in 1Q14, well below Apple’s original production plan.
We believe this would necessitate a re-negotiation of the Apple-China Mobile deal and therefore defer its finalization.
Kuo also remains conservative in his predictions of the impact of a China Mobile deal on Apple's iPhone shipment numbers for the first quarter of 2014, believing that the launch of the new TD-LTE model for China Mobile will be offset by falling sales in other markets around the world as momentum slows in the months following the iPhone 5s and 5c launches in those countries.