In plastic or gold, the iPhone will soon get a crack at Asia's Big Apple.
On Sunday, Apple and China Mobile finally signed a deal to bring the Cupertino company's flagship telephones to the largest wireless network in the world. Although the agreement, which starts Jan. 17, opens up a market of 763 million people, analysts say Apple has a lot of catching up to do with Chinese and western rivals that offer cheaper phones in what is still a developing country.
"The big challenge for Apple is that it needs more volume in sales," said Ken Dulaney, a Gartner analyst and Apple-watcher based in Santa Clara. He wondered if Apple, a notoriously secretive company, will stand pat on its cool brand and pricey smartphones? Or will the company bet big by creating cheaper phones for a rapidly growing market comprised of ordinary workers and villagers just coming into range of wireless communications.
"We're going to see if Apple is more of a religion than a business," Dulaney said.
Apple said it would reveal its prices for China Mobile later.
"iPhone customers in China are an enthusiastic and rapidly growing group," Apple CEO Tim Cook said in a statement Sunday, "and we can't think of a better way to welcome in the Chinese New Year than getting an iPhone into the hands of every China Mobile customer who wants one."
The Year of the Horse begins Jan. 31.
Actually, Apple iPhones have been available in China for some time through smaller carriers, selling about 23 million last year. But massive China Mobile offers the world's largest customer base by far. Apple had long pursued a deal with China Mobile, but the carrier seemed to warm up to the idea only after losing customers to smaller competitors that offered the iPhone.
"It's a huge deal for Apple," said Tim Bajarin, a technology analyst and president of Creative Technologies. "It's been a long time coming, and I think it's a win-win for Apple and China Mobile."
He said the giant Chinese carrier likely wants to expand its offerings to customers who covet stylish phones that broadcast a person's high social status -- successful Chinese customers, for example, would jump at a gold-plated iPhone.
"They wanted a real marquee company like Apple to market the high-end phones," Bajarin said.
At the same time, he said, the Chinese market is so big and "multitiered" that Apple's plastic but colorful iPhone 5C should do well with many Chinese cellphone users. Bajarin also said Apple might create another phone specifically for the Chinese market.
China 'Big Apple'
Analysts generally expect the use of smartphones to explode at the lower end of the market as China expands wireless connectivity to people in small cities and rural villages. Chinese carriers have been reluctant to subsidize phones at the high levels paid by carriers in the United States and western Europe. That's because millions of Chinese seem quite happy with phones that cost under $100. According to a report in the New York Times, Apple lists the iPhone 5C at $739 and the 5S at $871.
Years ago, Apple actually got off to a fast start in China, but the smartphone pioneer has now sunk to fifth among smartphone providers. Ahead of it are Samsung and Chinese makers Huawei, Lenovo and Yulong. In addition, Apple must cope with the dominance of Google's Android operating system for wireless phones in China. Apple phones use its iOS mobile operating system.
Some analysts have said Apple may have to cut prices to keep up with the Android players or introduce a new line of cheaper phones for a lower-end market that seems to have immense profit potential -- if sales are high enough.
"For Apple," said Dulaney, "China is the Big Apple."
Contact Joe Rodriguez at 408-920-5767 and follow him at Twitter.com/JoeRodMercury.