Apple iPhone 5 Launch in China

Apple started selling the iPhone 5 in China on Dec. 14th, 2012. Within the first three days of availability, over 2 million iPhone 5s were sold.

This number was a surprisingly strong showing - as many analysts had been predicting tough times ahead for Apple (in just a few months Apple's stock price has fallen from $700 to around $500): See the Nov. 16th, 2012 video post from The Motley Fool below:

2 million iPhones in China over one weekend is undeniably a an encouraging number to Apple shareholders (by way of contrast, Apple only sold 68.5 million iPhones worldwide in fiscal 2011).

So what is Apple's future in China?

Will Apple's share of the Chinese market for smartphones and iPads expand? Will a deal be struck between China Mobile and Apple? Will (as The Motley Fool predicts) cheaper phones push Apple out of the Chinese mobile market? Or will the larger profile iPhone 5 and the smaller profile iPad mini grow Apple's market share in China - becoming important status symbols (as they are in the West) for the growing mainland Chinese consumer class?

No one can predict the evolving Chinese market for connected devices with certainty - but after selling 2 million iPhones in one weekend, some analysts are predicting as many as 50 million iPhones will be sold annually in China starting in 2013.

Apple's future in China might depend on just how many Apple connected devices sell in China during the next two months. As reported in Business Insider: "With the Chinese New Year beginning on February 10 [2013] and shopping season starting in January, Apple has the two hottest products (i.e., iPhone 5 and iPad mini) in the world available for the Chinese consumers."

What are the challenges for Apple in China?

Perhaps the biggest problem Apple currently faces in China is the failure to link up with China Mobile, the state run provider with over 700 million cellphone subscribers - representing roughly 65% of the country’s wireless market.

The iPhone is currently sold only through Apple's seven mainland Chinese stores and various resellers with official iPhone service offered only through China Unicom and China Telecom, which together have fewer than half the mobile subscribers of China Mobile.

China Mobile is the cellular service giant in China and the only iPhones currently on the China Mobile network are unlocked versions. There is currently no official deal between Apple and China Mobile.

In part, the failure of Apple to officially offer a phone that works with China Mobile (so far) is because China Mobile does not support the connectivity that will show off Apple's technology to its best advantage (China Mobile's 3G network technology isn't supported by the iPhone, but China Mobile is apparently working with Apple on a TD-LTE-type 4G iPhone). Currently, most of China Mobile's smartphone customers are limited to 2G service: Of China Mobile's 704 million subscribers, only 79 million were on its 3G network as of mid December 2012.

But, as reported in Business Insider, there are other issues as well: "China Mobile and Apple still have to solve many issues, such as the business model, articles of cooperation and revenue division, but I believe we will reach an agreement eventually," China Mobile CEO Li Yue was reported by Chinese media as saying in Guangzhou before the Dec. 14th, 2012 iPhone 5 launch.

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