Apple Hosts First-Ever iPhone Launch in Beijing

Apple Inc. AAPL -2.28% hosted its first-ever iPhone product launch in Beijing Wednesday in an indication of how important the world's largest smartphone market has become for the Cupertino, Calif., company.

But the minimal drop in price for the iPhone 5C is an indication that Apple's pricing strategy within China has not changed, and that it will continue to aim its phones at the top end of the market.


Priced at 4,488 yuan ($733) in China for the basic 16-gigabyte version that's unsubsidized, the iPhone 5C is unlikely to attract a new set of less-wealthy consumers outside of China's largest cities. Though Apple has maintained a strong market share in high-end smartphones in China, it has seen its total market share dwindle as consumers have increasingly bought cheaper phones from Samsung Elecronics Co. 005930.SE +0.14% and a host of domestic vendors that sport specs similar to the iPhone.
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In the June quarter, Apple's China market share fell to 5%, ranking it seventh behind market leader Samsung, which had 18%, and a cluster of domestic manufacturers such as Lenovo Group Ltd.and Huawei Technologies Co., according to data from research firm Canalys.

"At this price, Apple won't be targeting cost-conscious consumers in China," said Nicole Peng, a Shanghai-based analyst for telecom research firm Canalys.

Unless Apple comes up with additional announcements in China, such as special subsidies from local telecom operators that lower the phone's upfront cost, the 5C is unlikely to broaden Apple's customer base as much as many people had expected, Ms. Peng said.

China's carriers have yet to announce pricing packages for the phones.

In the U.S., carriers provide subsidies to lower the upfront costs of purchasing an iPhone, The 5C will cost $99 in the U.S. with a two-year contract. But in China, consumers usually pay the full price for the iPhone because carriers' subsidies kick in later as a refund that can lower monthly phone bills.

The limits of Apple's reach with the new iPhone 5C are clear in Yangquan, a city of one million in the mountainous Chinese province of Shanxi. There, one Samsung vendor named Wang Shoubin estimated that around 70% of customers were looking for phones between 1000 yuan and 2000 yuan, with many others looking even lower.

"Here everyone buys national products," he said, referring to the proliferation of Chinese domestic brands that have come to dominate the low-end by offering cheap phones.

Even in the far more affluent city of Shijiazhuang, where vendors say they expect the cheaper iPhone to sell well, the phone will still face stiff competition from local phone makers. According to three different vendors in the city's Hailong Electronics City, most sellers will be trying to up-sell users to the iPhone 5C from cheaper phones made by domestic companies.

Ma Tao, who owns a shop on the second-story of the electronics mall said he didn't think the iPhone 5C would fly off the shelves as quick as cheaper Chinese made phones.

"Xiaomi phones are 1500 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 vendor that sells high-spec phones close to cost.

"If the inside is the same, but [the phone is] 1,000 yuan cheaper, people will choose it," he said. At 1999 yuan, Xiaomi's newest phone announced last week is less than half the cost of the iPhone 5C.

At the event Wednesday held in Apple's Beijing office in the city's eastern financial district, Apple replayed a broadcast of its Tuesday product launch in California in Chinese and also provided samples of the new products for about 60 local journalists. Prior to the event, camera crews briefly blocked the gated entrance to the elevator bank that leads to Apple's offices, in the tallest building in Beijing. Apple also provided headsets for local reporters that played a translation of Chief Executive Tim Cook's speech from yesterday.

Apple is breaking with previous practices of delaying the release of the new iPhones in China. The phones will be released at the same time they are in the U.S., the company said.

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Tags : Nilesh Patel