July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

China’s speedy growth in fast-mobile subscriptions — and increasing mobile competition among the giant Chinese mobile carriers — will be key factors in driving Apple’s moldering stock price to unseen heights of over $800, one analyst said today.

With over three quarters of net new mobile growth in emerging markets, if Apple is ever to get its stock back to the $700 heights of summer 2012, it needs a less expensive and more carrier-friendly product suite. That’s coming this summer, according to Brian White of Topeka Capital Markets, and just in time.

The three major Chinese carriers reported subscriber growth for April 2013 today, and wireless subscribers rose 13 percent year-over-year to 1.16 billion. Fast wireless subscribers using 3G connection speeds rose 84 percent to 293.1 million.

And that’s the critical number.

Source: http://www.flickr.com/photos/dailysublime/6814011513/

Competitor Samsung will have something to say about Apple’s success — or lack thereof — in China.

The major competition right now between China Mobile, China Unicom, and China Telecom will drive China Mobile, the grandaddy of mobile in the Middle Kingdom, to finally adopt the iPhone … and offer Apple’s iDevices to its 730 million mobile subscribers. That’s a deal that Apple and China Mobile have not been able to consummate since 2009, and it could be the deal that kickstarts Apple into massive growth outside its U.S. market once again. Especially given the fierce competition between carriers in China.

And the competition is all over the 293.1 million 3G subscribers, who are projected to grow to between 375 and 400 million by the end of 2013.

China Mobile’s 730 million mobile subscribers includes 120 million of the higher-end 3G subscribers, meaning China Mobile, which has historically trailed Unicom and Telecom in the more lucrative segments of the mobile market, leads the race for 3G subscribers in raw numbers. Unicom and Telecom, however — both of which sell Apple’s iPhone — have a much higher percentage of users on big contracts, giving them better per-user margins.

China Unicom has 254.6 million mobile subscribers, including 91.9 million 3G subscribers, and China Telecom has 170.2 million users and 81.1 million 3G users.

Cue the lower-priced iPhone, which White believes is coming this summer.

That will help Apple finally ink a deal with China Mobile just as the bulk of its 730 million subscribers are starting the switch to faster 3G connections. Which could mean tens of millions of new customers for Apple in Asia, and — with growth in other countries as well — set up a sales growth recovery for Cupertino that, White believes, can bring AAPL back to its $700 heights, and beyond, up to his price target of $888.

That’s a lofty target, of course, and a lot will have to change between the ears of Wall Street analysts and institutional investors for that to become a reality. Morgan Stanley, of course, has also published an analysis that Apple could triple sales in China with a lower-cost iPhone.

Since Apple sold $8.8 billion worth of product in China in the second quarter of this year, out of $43.6 billion in total sales, tripling that could be $26 billion quarterly, and perhaps as much as $100 billion annually.

Those are big numbers, and whether Apple can accomplish that or not, no one knows. But if it did, that would certainly have a major effect on Apple, its stock, and the mobile markets.

Major competitor Samsung, which sold 400 million phones last year and captures 95 percent of all profits in the Android device ecosystem, will have a few things to say about it too.

photo credit: wZa HK via photopin cc

Over the past weekend, China Central Television was caught mounting a clumsy reputation attack on Apple via Sina Weibo, the popular Chinese Twitter/Facebook hybrid with over 400 million users. As the Wall Street Journal reports, a flood of celebrity posts hit the site at 8:20 p.m. local time, shortly after a CCTV report on Apple’s “biased warranty and customer service policies.”

Unfortunately, some of the celebrities forgot to delete the timing notification. For example, Peter Ho, a Taiwanese/American actor, posted this (emphasis added):

Wow, Apple has so many tricks in its after-sales services. As an Apple fan, I’m hurt. You think this would be acceptable to Steve Jobs? Or to those young people who sold their kidneys [to buy iPads]? It’s really true that big chains treat customers poorly. Post around 8:20.

Other messages hit the site around the same time, and Sina Weibo users noticed the flood — and the odd “post around 8:20″ postscript — and commented on it. Ho deleted the post, then claimed that his account had been hacked, an ever-popular excuse for prominent social media users who get caught doing something fishy.

Apple has been incredibly successful in China, with some of its high-end products enjoying higher market share in China than elsewhere. But it has also failed to conclude a deal to sell its most important product, the iPhone, through China’s number one mobile carrier, the 700-million subscriber China Mobile. And with a potential iPhone mini coming soon to boost sales in the Middle Kingdom, Apple needs good relations with Chinese business and government more than ever if it wants to make that a reality.

Unfortunately, it appears powerful interests in China may not want that to happen.

Here, we’d call it astroturfing. In China, it’s pretty much pol-bus-itics-ness as usual.

Image credit: Chinese flags/ShutterStock

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

First the iPad Mini, then the iPhone Mini?

It makes some sense linguistically, but it could also make some sense financially, at least according to Morgan Stanley analyst Katy Huberty. She estimates that Apple would add $2.4 billion in iPhone revenue and triple the number of customers it would appeal to in China alone with an iPhone Mini priced at $330.

That’s in line with flagship models from Lenovo, Huawei, ZTE, and Coolpad, Huberty said, ranging from 2,000 RMB to 4,000 RMB, and that would expand the number of Chinese citizens who could afford an iPhone from 10 percent of the phone-buying public to 29 percent.

Apple has said — most recently via Tim Cook at a Goldman Sachs conference — that “we’ll never … make a crappy product.” But Apple has never said that it won’t reduce prices aggressively. In fact, that’s exactly what it did do by bringing out the iPad in place of the laptop and the iPod Shuffle in place of the iPod Touch, Cook said.

What about Apple’s well-known fat profit margins on a lower-cost iPhone?

“Even in a scenario of low 40 percent gross margin and one-third iPhone cannibalization rate, flattening legacy iPhone shipment growth, which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars,” Huberty said.

Apple’s big problem is China is not just price. It’s that China’s biggest mobile carrier, China Mobile, has yet to cut a deal with the iPhone maker despite Cook’s recent trips to the country. China Mobile has a staggering 700 million subscribers, and while those are being whittled away by other, more nimble competitors who do offer the iPhone, 700 million potential iPhone buyers — or whatever fraction of those 700 million who can afford an iPhone — is a big chunk of customers to ignore.

Apple and China Mobile have been in on-again, off-again talks with each other since 2009, but so far the two companies have not been able to reach an agreement.

One other thought: A cheap iPhone would have greater potential than just in mainland China. Frankly, there might well be room in the U.S. and other mature markets for a lower-cost iPhone, and the rest of Asia and Africa are massive markets for new smartphones.

An iPhone Mini could help open those emerging markets for Apple as well as have immediate impact in China.

photo credit: Andrew Currie via photopin cc

Apple’s Phil Schiller has categorically denied that the Cupertino company is working on a cheap iPhone, putting to rest speculation that we covered skeptically a few days ago and the Wall Street Journal and Bloomberg also published.

As The Next Web translated, Schiller said this:

“Despite the popularity of cheap smartphones, this will never be the future of Apple’s products. In fact, although Apple’s market share of smartphones is just about 20 percent, we own the 75 percent of the profit.”

Of course, Steve Jobs — who probably taught Phil Schiller everything he knows about marketing — also said Apple would never made a 7-inch tablet. And frankly, we should wonder how truthful Schiller is being when that tired old 75-percent-of-the-profit line comes out of Apple’s back pocket, because it’s only true in a very narrow, specific, and nuanced sense, even if you’re very, very generous about your terms and conditions.

In other words, it’s kind of a lie.

Which doesn’t mean that Schiller is lying about cheap smartphones. But it could mean that while “cheap” smartphones are out — and no one who follows this company realistically thought that it would make something cheap, flimsy, or in any way substandard — significantly less expensive is not.

Point of reference: iPad Mini.

Realistically, as the original Shanghai Evening News story references (awful Chinglish from Google Translate here), Apple made 15 percent of its revenues from China and blessed little from China’s single biggest carrier, the 700-million subscriber China Mobile, which Schiller’s boss Tim Cook was visiting today. You can bet Apple wants that 15 percent to grow significantly.

And with 75 percent of new phones being activated in either Asia or Africa, an $800 handset isn’t going to do it.

A less expensive iPhone may seem crazy, but it is something that can help Apple compete in emerging markets. And it’s just what we humbly suggested in December.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

Will the iPhone 5 be coming to China Mobile’s 700 million subscribers? Apple needs this, sure, but make no mistake: China Mobile needs it just as bad.

China is the world’s largest market for smartphones, edging out the U.S. in July of 2012 to take the crown. But the country’s biggest carrier, China Mobile, does not yet officially carry the iPhone, despite the fact that probably tens of millions of its customers have purchased Apple’s smartphones elsewhere, jailbroke them, and are using them on its network.

But the need to jailbreak an iDevice to get it to work on China Mobile may soon be over, as Tim Cook and China Mobile chairman Xi Guohua met today to discuss “matters of cooperation,” according to Reuters.

And both companies need each other. Badly.

Apple needs to grow, and while it has had a great past few months domestically — rising over 50 percent market share stateside — global market share is another matter entirely, as 75 percent of all new phones are being activated in Asia and Africa. China is the world’s most populous country, buys the most smartphones, and has the most cellular subscribers, and China Mobile’s 700 million subscribers could easily become tens of millions of Apple customers — if Apple can do the deal.

Meanwhile, China Mobile might be the queen of carriers right now, with that massive subscriber base, but the company has its own issues.

China Mobile’s share of the most lucrative customers is dipping, with a seven percent 3G subscriber market share loss in 2012. The company’s situation is analogous to Japan’s NTT Docomo. Docomo, long the digital darling of mobile carriers and Japan’s premier mobile telecom, is losing subscribers at a record rate due to its easily-solvable lack of iPhonicity.

Simply put: iPhone subscribers are the most valuable segment of telecom markets. By missing out on this segment, China Mobile is hurting its own profits and benefiting its competitors, who do carry the iPhone.

But 700 million subscribers is a very nice little cherry indeed, and it sounds like China Mobile will not do a deal without significant concessions from Apple — possibly including a share of app store revenue, something Apple has never done before and is unlikely to do today.

These two companies have been talking since 2009. Now is the time for both of them to do a deal, for both their sakes.