A low-cost iPhone could triple Apple’s market share in China, Morgan Stanley analyst Katy Huberty claims. Sales of the iPhone 5 didn’t perform as well some had expected, but Apple still retains roughly 10% of the rapidly growing Chinese smartphone market.
In her note issued to clients on Tuesday, Katy Huberty brings new information to surface regarding the potential of a low-cost iPhone in the Chinese smartphone market and – going further – in emerging countries.
Contrary to earlier claims, smartphone prices seem to be stabilizing in China, which means a $330 iPhone – which would sell unlocked for this price – would be competitive with other flagship products currently on sale from Lenovo, Huawei, ZTE and Coolpad.
Apple’s iPhone 5 is currently available through China Unicom and China Telecom. Huberty’s opinion that a deal with China Mobile could boost Apple’s iPhone sales is in line with other analysts’ thoughts. However, there are certain roadblocks Apple needs to address, with the first one being the launch of the cheaper iPhone. “[the] iPhone mini and a LTE license from the Chinese government this year or next could finally persuade China Mobile (CHL), with 700 million subscribers, to cut a deal with Apple,” she wrote.
Huberty has also addressed investors’ concern over Apple’s gross margins and cannibalization: Even in a scenario of low 40% gross margins and 1/3 iPhone cannibalization rate (i.e. customers buy one third fewer full priced iPhones), which she sees as conservative, the iPhone mini adds incremental revenue and gross profit dollars.
Rumours of a low-cost iPhone gained traction at the beginning of the year with Digitimes dropping the bombshell, confirmed by The Wall Street Journal and Bloomberg’s sources. iLounge’s Jeremy Horwitz even reportedly had the chance to hold one such prototype in his hands.