Apple (NASDAQ:AAPL) CEO Tim Cook has repeatedly emphasized the importance of China to his company. In fact, in early 2013, Cook said China is likely to eventually overtake the U.S. as the tech giant's top market.
Thus, many people were surprised that China was not included in the list of countries getting the iPhone 6 on Sept. 19. (For context, in 2013, China was part of the first wave for the iPhone 5s and 5c launches.) Observers were even more puzzled when China was omitted from the second wave of the iPhone 6 launch on Sept. 26.
Confusion turned to distress when a Chinese business newspaper claimed the iPhone 6 won't be available in China this year whatsoever. Investors drove Apple stock down as much as 2.7% on Tuesday due to worries about what the delayed iPhone 6 launch in China means for the company's prospects. Fortunately, the answer is that it doesn't matter very much at all.
Demand is overwhelming supply
The first reason why investors don't need to worry about this situation is that demand for the iPhone 6 vastly exceeds supply. On Monday, Apple revealed that more than 4 million people had pre-ordered the new iPhone 6 and iPhone 6 Plus in the first 24 hours of availability. For comparison, the iPhone 5 -- which was also highly anticipated -- received about 2 million pre-orders.
The pre-order number is impressive because many people might want to look at the iPhone 6 and iPhone 6 Plus in person before deciding which one to buy. Furthermore, many Apple fans will buy the devices in stores rather than online, hoping to get their hands on the new iPhones as soon as possible.
In 2012, iPhone 5 supply did not catch up with demand until late November -- even though the iPhone 5 wasn't available in China until December. Despite the late start in China, Apple sold 47.8 million iPhones in the fall quarter that year -- up nearly 30% from the prior year.
Demand could be even stronger this fall. A recent survey by comScore found that tens of millions of current iPhone users in the U.S. alone plan to upgrade to the iPhone 6 (or 6 Plus) this fall. Including non-iPhone users who may switch and all of the other countries where the device will be released, it seems likely that Apple will sell as many iPhones as it can make for the next few months -- with or without China.
Plenty of iPhones will make it to China
A second thing to consider is that plenty of iPhones will make it to China regardless of the delay. There is a flourishing "gray market" for trade between Hong Kong (and even
Singapore) and mainland China. Hot electronics products available in Hong Kong but not the rest of China are snapped up by entrepreneurs who resell them on the mainland at a huge markup.
Since Hong Kong and Singapore are both included in the first launch wave for the iPhone 6 and iPhone 6 Plus, plenty of iPhones will be resold in China soon to meet demand from the super-rich. Some iPhones might even be brought back by special couriers from other launch countries for resale in China!
Furthermore, the iPhone 5s and iPhone 5c are still on sale in China. Apple may drive more sales of those older devices by reducing their prices. (Recall that Apple regularly discounts older models when its newest phones come out.)
Just a rumor
Investors should also recognize that all we know for sure right now is that the iPhone 6 and iPhone 6 Plus will not launch in China in September. All of the other speculation is pure rumor at this point.
The 21st Century Business Herald claimed in its recent report that the lack of an agreement with Chinese regulators means the new iPhones won't be available in China until 2015. However, this paper has been accused of trying to extort companies in the past few years by threatening to run negative stories if they don't buy ads.
So while the report of long delays for the iPhone 6 and iPhone 6 Plus in China could be genuine, it could also be mistaken or even a deliberate piece of misinformation. This isn't something worth worrying over.
Some Apple investors appear worried about reports that the new iPhones won't arrive in China until next year. However, while the China launches of the iPhone 6 and iPhone 6 Plus have been delayed, the source reporting that the launch won't occur until 2015 is not reliable.
Most important, even if the new iPhones don't officially launch in China until 2015, it's no big deal for Apple. The company will have trouble keeping up with the insatiable demand for the two new iPhones for the next several months, even without selling them in China. In addition, some iPhones will make it to China from Hong Kong and elsewhere via the "gray market."
Lastly, Apple investors should remember that iPhones weren't available through China Mobile -- which controls about three-quarters of the Chinese wireless market -- until January 2014. Apple has already succeeded in China even with one hand tied behind its back. As long as the iPhone 6 and iPhone 6 Plus make it to China eventually, Apple will be just fine.
Adam Levine-Weinberg is long January 2016 $80 calls on Apple. The Motley Fool recommends Apple and China Mobile. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.