China Mobile Stocks 1.4 Million iPhone 5s Units Ahead of Friday's Launch
Apple's iPhone 5s assembler Foxconn has shipped roughly 1.4 million iPhone 5s units to China Mobile in advance of Friday's launch for the carrier, according to a report from The Wall Street Journal. After several years of negotiations, Apple finally announced last month that the iPhone would be coming to the world's largest carrier on January 17.
While the initial shipment volume doesn’t represent the total sales at China Mobile for January, the figure helps to gauge early demand for iPhones from China Mobile, the world’s biggest carrier by subscribers with more than 760 million customers. China Mobile began taking preorders for iPhones since Dec. 25.
“Shipping one million or more iPhones to a single carrier per month is substantial. But we have limited visibility beyond this month as Apple hasn’t informed Foxconn of the volume for the next shipment to China Mobile,” said the person.
China Mobile will also launch the iPhone 5c on Friday, but early shipment numbers for that device have not been revealed. Pegatron serves as Apple's primary assembly partner for the iPhone 5c.
Estimates of Apple's potential iPhone sales on China Mobile have varied widely from 10-30 million units this year, with some suggesting that sales may be lower than expected due to demand having been partially satisfied through the country's other two carriers, China Unicom and China Telecom, and waning enthusiasm for the iPhone amid increased smartphone choices in the country.
On the other hand, China Mobile already has tens of millions of iPhones operating unofficially on its network but unable to take advantage of the fastest speeds due to technological incompatibilities between older devices and the carrier's network. As a result, there is already a substantial base of iPhone users on China Mobile who may be looking to upgrade in the near future.
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Top Rated Comments
Your math skills are unimpressive.
That's because this really doesn't seem like a great number. Out of 800MM users, with apparently 200MM+ smartphones on the network, you would have hoped that pent-up demand was greater than 2MM units. Now, hopefully we will find out that it was, and 1.4 was simply all Apple could spare from other parts of the world where demand is still high, but to me that doesn't seem to wash. As a shareholder, I am certainly expecting a higher number than 15 million in the first year to China Mobile, and I expect that the stock will suffer to an extent if they don't sell an additional, say, 20MM as a result of this deal in 2014.
Remember, China Mobile is the last big new market for iPhone. I remember posting, years ago, about how the financial story for AAPL vis a vie the iphone was so great because look how good it already sells, and they are not yet in India, China, Brazil, Russia. Well now all those dominoes have fallen, and there is no "free" growth left. All new sales will come from markets where Apple is already competing with itself and Samsung and the rest. That's a scary change, from a growth perspective.
I think the larger iPhone is absolutely crucial to maintaining growth in sales. I am a freelance IT consultant, and I see many, many of my clients going to Android for one and only one reason - the big screen. The over 50 set (which is a HUGE market, new to smartphones) is being taken over by Android when it should not be so, because those people would rather have an iPhone. But they can't get past the screen size difference, so they buy Android phones.
How then do you guauge the demand in this case? Provide your thesis how china mobile and apple should calculate first month's demand given that both parties would want to cover their bases and that the model is still not the most condusive to selling iphones (as others and you have mentioned given the cost of the iphone in china and the lack of enthusiasm for subsidy models that exist in the market currently).
One word of caution from WSJ via CNET:
The number doesn't account for all of China Mobile's iPhone 5S sales earmarked for January, the Journal added, but it does provide some insight into early demand for the phone.
http://news.cnet.com/8301-13579_3-57617182-37/china-mobile-snags-1-million-iphone-5s-units-report/
In a totally different market with different price sensitivities, different carrier subsidy model and/or acceptance by the general user base.
These are things that have to be ironed out by the carriers in china, and its not going to happen overnight just by signing a deal with apple. Apple has the phone in china with its biggest carriers, its upto the carriers now to bring out innovative deals that provide an even greater percentage of the populus access to the device through discounts, subsidies and innovating financing options. Like I said, apple may in the future look at competing in the lower price category but I really do not see this happening anytime soon with anything other than older model phones. Even if you have X number of people that could perhaps afford the iphone, the iphone may not appeal to their desires..It may be too small for some..May be too much of a phone for others...This is always an issue when you compete with ONE MODEL as opposed to a linup and this is precisely why I think that apple will look to diversify into phablets and latest model phones at multiple price points..The current size of its potential customer base (Those around the world that can afford to buy their products) is large enough to allow them to do this and make a lot of money by doing so!
When you sign a deal of this magnitude you think about what future benefits it brings..Deals so large usually take some time to bear fruit. What this deal does offer apple is an outrageous customer base (or potential customer base) that they can design their products around for the future. This in no way lets apple chop off its market presence in China (Stores, advertisement other deals and specials) or quit working with carriers to provide better means for customers ot own their devices. I see this deal in china having a great effect on apple's lineup of phones in the comming years...While they may sell 1.4 million iphones in a month and their may even be shortages as demand outstrips expectations form apple and china mobile I still feel that the effect will bring far greater benefits for apple in the comming years as they look at developing products for the future and entering new markets where they did not offer products earlier (Phablets, different price points, wearables etc)..
Comparing the US market (Verizon example) to the chinese market is unwise, Apple needs to build up the CHINESE market and that will take time..More stores, diverse products, overall acceptance of their products etc all takes time...They will continue to grow in china although the market share may decline in the short term (MAY) given other carriers could grow even faster, but all the investments in the back end, deals with carriers etc will bear fruit in the long term as apple establishes a firm (er) presence in the market.
I believe the market for apple is in its infancy given that apple has just struck a deal with its largest carrier! They'll need a few years to mature! New products will surely help !
Cost is going to be an issue in all markets with or without subsidies and that apple has to deal with since i do not think they are fully committed to compete in the lower pricepoints..Apple therefore will probably focus on its growth in the premeium phone market (see how it compares to the galaxy family in the comming years in china for example)..What the china mobile deal can perhaps bring about in the chinese market is a renewed competition to bring out newer plans that make it a little more easier to own the iphone..Some creative financing options or something that perhaps apple could look to engineer in the future, by working closely with providers in china..All in all the APPLE CHINA strategy in the next 4-5 years is going to be very interesting..In my opinion a bigger product lineup in the mobile category will go a long way at securing a higher marketshare, but for me apple would look more closely at the premium market share in the short-mid term while it develops a relationship with china mobile and looks at future plans for the all important market in china !
Just my 2 cents..