Can the iPhone 5C Compete in China? Don't Bet On It

Apple (NASDAQ: AAPL  ) debuted two new iPhones yesterday, including the colorful new iPhone 5C. While no one was expecting Apple to launch a cheap iPhone, the device doesn't even come close to being inexpensive enough for emerging unsubsidized markets like China.

The devil's in the details
With the 5C grabbing much of its tech from the iPhone 5, let's talk about what is new about the device:

  • A plastic casing available in green, white, blue, pink, or yellow
  • Upgraded front-facing iSight camera for FaceTime HD
  • More LTE bands than any other smartphone
  • A slightly bigger battery than the iPhone 5, which increases LTE Internet browsing by 2 hours and add 25 more hours of standby time 

Apple ditched the iPhone 5 and is replacing it with the 5C, selling the 16GB version for $99 with a two-year contract. That makes it Apple's first new phone being sold for just $99. Other than that, the 5C uses the same A6 chip, Retina display, and other specs as the iPhone 5. 

All right, so Apple has a slightly better and more colorful smartphone on the market. Now what?

Apple iPhone 5C. Source: Apple.

Not much of a game changer
The Wall Street Journal reported today that Apple just received a network license to sell its iPhone on China Mobile (NYSE: CHL  ) . If it proves true, this would give Apple access to China Mobile's 700 million mobile users, but there's just one problem: China largely sells smartphones without subsidies, which means Apple's new device will come in at a staggering $733 in that country. Compare that with rival Samsung selling Android phones in China for around $100 unsubsidized. Lots of colors and even the new iOS 7 don't make up that almost $600 price gap.

That doesn't mean a deal with China Mobile would be insignificant, but without an inexpensive new iPhone, Apple misses out on any low-end smartphone unit sales.

Apple iPhone 5C. Source: Apple.

That's bad news for Apple as growth in the high-end smartphone market is slowing and low-end growth increases. With that in mind, I think Apple missed the boat with the 5C. The phone is still a premium device that doesn't offer any significant selling points compared to its competition. While first-time smartphone buyers surge in emerging markets, Apple seems satisfied to stick with premium smartphones and let Samsung and local vendors dominate the low-end market.

Investors should look for more details on a China Mobile deal and if Apple can sell its older phones like the 4S on the carrier. An official deal would be a step in the right direction, but don't expect Apple to dominate the China smartphone market without a truly inexpensive iPhone. For now, it's business as usual at Apple.

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Read/Post Comments (6) | Recommend This Article (1)

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  • Report this Comment On September 11, 2013, at 8:46 PM, Ostrowsr wrote:

    So... sell the iphone4 for $100 and offer upgrades at any time for $100. The wealthy buy the 5C and 5S, and then drop the price for the middle class and then "the masses" like classical economic theory says to do.

  • Report this Comment On September 11, 2013, at 8:51 PM, Oril wrote:

    Nice to see Apple fall further than Blackberry today.

  • Report this Comment On September 11, 2013, at 9:52 PM, Oril wrote:

    Nice to see Apple decline more than Blackberry today. So much for the new 'cheapo' iPhones.

    Q10 much better bang for your buck at 0 down on a two year contract.

  • Report this Comment On September 11, 2013, at 10:11 PM, cazic99 wrote:

    5C is for the fastest growing smart phone markets called Kids 10-18. Think 13 year old girls at ATT stores with mom standing in front of a hot pink 5c for $99, or a generic Samsung or the Gigantic Samsung Watch lol....Which one you think she picks? This is Apple's genius....And why they make all the money

  • Report this Comment On September 11, 2013, at 10:29 PM, Cuftbll wrote:

    The 5C was built for china!!!! It was built for kids/teens in America. Xmas is going to be huge!

  • Report this Comment On September 12, 2013, at 4:45 PM, FoolsGems wrote:

    For Apple to make a phone that would sell in China for $99 that same phone would sell for about $15 here in the U.S. I'm betting most people, regardless what country they live in, will eventually and always choose to have the next best high-end phone rather than stick with a low-end phone. I believe Apple's decision to make and offer a higher-end phone to the Chinese as well as many Americans will pay off in the end. It may cost $733 in China but it's really just a $99 phone here in the U.S. folks.

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