China’s Take on iPhones: It May Surprise You

Business news |
By eeNews Europe

While American corporations weren’t watching, it seems, the Chinese outgrew their beads-and-trinkets phase.

Meanwhile, I’ve found so far no straight answers as to why Apple’s deal with China Mobile has been delayed.

It’s well known that China Mobile’s proprietary TD-SCDMA network has never worked as well as its competitors’ 3G network, deployed by China Telecom and China Unicom. China Mobile’s TD-SCDMA network cannot offer a “good enough” iPhone user experience. This is likely one reason why Apple might have been reluctant to play by China Mobile’s rules and tried to play hardball with China’s largest cellular operator.

After Apple’s much anticipated global media event launching iPhone 5c and 5s, the immediate media reaction was more or less universal: The new iPhones will be too expensive in the Chinese market, where Apple needs to play.

Looking at Apple’s iPhone strategy in China, one Chinese mobile industry observer, who spoke on the condition of anonymity, believes Apple is smart not to reduce the price of 5c. She predicts that price cuts won’t advance Apple’s China strategy. 

One reason is that the import tax in China is very high. Reducing the price only reduces Apple’s bottom line. Indeed, iPhones sold in China are subject to a 17 percent value-added tax.

Second, it also makes sense to price hardware relatively higher in China, compared to other regions, because Chinese people are less willing to spend money for apps.

Third, my Chinese industry observer noted, “Apple doesn’t need to compete with Samsung in the middle range of prices.” She pointed out that Samsung already has too many devices in that range.

Her advice to Apple?  “Just stay in the high-end. Keep margin until they have innovative products.”

In nutshell, she described Chinese consumers as follows: “High-end customers don’t care about price. They care about brand.” Besides, “Apple’s software platform and quality deserves the price,” she added. 

Bottom line: If those educated Chinese consumers and industry sources are right, Apple’s China strategy, after all, might not be so far off the mark.


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