As somebody who follows Intel closely, it's tough to forget how well the Lenovo K900 -- which was powered by Intel silicon -- sold in China. The phone was big, beautiful, and sported the logos of two brands that the Chinese population knows and loves. With the iPhone 6, Apple (NASDAQ:AAPL) has a chance to not only drive that kind of success but to go even further than Lenovo/Intel could.
They love big screens in Asia
In Asia, and in particular China, large-screen phones are all the rage. Why that's the case is completely irrelevant to the discussion, and while many prefer the compact nature of the iPhone 5s, there's an even bigger market just hungry for a large iPhone. Remember, while Samsung sells more phones than any other handset vendor, not even Samsung has a brand that's as valuable as Apple's, leaving the door wide open for Apple to gain share.
Now, as detailed here, a larger screen will necessarily drive up the bill of materials for a next generation iPhone. However, the analysis shows that even with an incremental $40/unit cost, Apple need only grow sales by 8 million units over the iPhone 5s to offset the gross profit decline. Since a larger phone could gain some real traction among buyers that have preferred Samsung's Galaxy S/Note lines for their size, taking an 8 million unit bite out of Samsung's greater-than-300 million phones sold per year shouldn't be too hard.
How big is the opportunity?
Just how large is the opportunity for Apple in China? Well, the China Mobile (NYSE:CHL) deal that everybody was so excited about didn't really amount to much; the carrier added about 1 million iPhone users during February. Now, there are some handset vendors that would love an incremental 1 million phones, but for Apple this isn't much especially if this 1 million represented the magnitude of the pent-up demand.
However, many believe that rumors of a large iPhone are actually keeping buyers from rushing to pick up the 5s. This seems plausible, especially given how important large phones are in China. That said, investors should also keep in mind that the incremental addressable market may not be as large as some may have expected. We won't really know until we get the first channel checks from the various analysts following the iPhone 6 launch.
Foolish bottom line
There's no doubt that a larger iPhone or, more likely, a family of iPhones with multiple sizes will help Apple maintain/increase its market share across a number of markets. The fact that Apple has waited so long to release a larger iPhone is a bit frustrating, but it should all ultimately work out for shareholders if there really is that kind of pent-up demand in China, and indeed the world, for a larger iPhone.