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Does Apple really need to make a cheaper iPhone for China and India?

Karen Haslam | Jan. 18, 2013
Why are China and India of such importance to Apple, and is it really necessary for the company to produce a budget iPhone to grab market share in these territories?

Yes. The iPhone is too expensive

The entry-level iPhone 5 is priced at 5,288 yuan (£532). That's equal to about six weeks' pay for the average urban worker, according to data from the National Bureau of Statistics. The average monthly pay in China is about 3,585 yuan (£360).

Local handsets producers are luring customers with smartphones costing less than 1,000 yuan (£100) each, according to IDC.

Yes, China and India don't have the subsidized model for mobile phones

When we sign up for a new phone we rarely have to pay the full price of the handset, it is usually subsidized by the carrier (we basically pay for the phone as part of our contract). That is not the case in emerging markets. Piper Jaffray analyst Gene Munster notes that China and India don't have a business model where handset prices are subsidized by the networks, hence the need for cheap iPhone handsets.

Yes, to address the massive market potential.

A report from research firm Canalys claims that China's smartphone market has the potential to be twice as large as the US market. Apple's CEO Tim Cook has said that he expects China to become the company's largest market, surpassing the US. It's a big market - there are 1.1 billion mobile users in China.

As for India, with 850 million subscribers, India has the second largest number of mobile phone users in the world. Mobile device sales in India are forecast to reach 251 million units in 2013, an increase of 13.5%over 2012 sales of 221 million units, according to Gartner.

Like China, India is a very competitive market with 150 device manufacturers many of which are focused on the low-cost phone market.

Fitch thinks a low-cost iPhone will allow Apple to gain reasonable market share in emerging markets like China and India.

Yes. Or Samsung will win

Samsung's a formidable enemy with a wide device portfolio and an established presence in these emerging markets.

"Samsung is an extraordinarily good competitor," said former Apple CEO Sculley. "The differentiation between a Samsung Galaxy and an iPhone 5 is not as great as we used to see."

Yes, Apple needs more variety

Samsung has a wider variety of handsets in terms of both price and screen size than Apple. Apple can't have all its eggs in one basket. Variety is the spice of life.

 

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