Did Apple's New iPad Flop in China?

Apple (Nasdaq: AAPL  ) product launches are frequently marked by long lines and media frenzies. Sometimes, they even have to call in the SWAT teams to control rambunctious buyers trying to get their hands on the latest iDevices, like when the iPhone 4S launched in China in January. The latest and greatest iPad officially launched in China last Friday, and the turnout was rather ... calm.

The Next Web reports that the turnout was modest and things went off without a hitch, and security guards that were on the scene idled by.

Source: The Next Web.

Source: The Next Web.

Before Apple shareholders burst into iTears over the underwhelming turnout, consider two primary factors contributing to the surprisingly orderly launch.

The first is that Apple has taken steps to address one of the bigger problems at its product launches in China: scalpers. Highly organized teams of ambitious scalpers typically plague product launches, with people being transported in and being paid to stand in line while scalpers amass devices to resell them at a profit. The scalpers sometimes outnumber legitimate customers, so Apple has implemented a reservation system that requires prospective buyers to register interest in advance. Buyers are assigned a specific time to swing by and pick up their devices, helping reduce line congestion while also mitigating scalpers.

The second is that many consumers already have iPads, thanks to a robust gray market where devices are smuggled in. While the new iPad just launched in Mainland China, the tablet has been on sale in Hong Kong since March at the same time as the United States. The device is also cheaper in Hong Kong thanks to tax discrepancies. Ambitious resellers will load up on iPads in Hong Kong and smuggle them across the border. Estimates are as high as 200,000 units making the trek over the past four months, representing roughly 1,500 per day. That's helped satiate demand for the new tablet ahead of the official Mainland China launch.

As far as how investors should interpret the news, that means that instead of seeing a calendar third-quarter boost from iPad sales in China, Apple has likely already been enjoying that boost for its earnings release due out tomorrow. The device was launched in March with only two weeks left in the first quarter, so if those estimates turn out remotely accurate, most of those 200,000 units would have fallen in the just-closed quarter.

The company very well might have an iPad blowout in store after all.

There's a good chance that Apple will report an iPad blowout, which is why it plenty of room to run. The Motley Fool has just launched a brand-new premium Apple research service catering specifically to current or prospective Apple investors. Sign up now. Mobile computing is the next trillion-dollar revolution. Apple's just one of many ways to play, including this company that's powering a new generation of gadgets. This report is totally free.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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