New iPhone 5C theory: Apple missed out on China's 'Golden Week' carrier subsidies

NPD DisplaySearch analysts forward theory that iPhone 5C sold poorly in China during national holiday

1 2 Page 2
Page 2 of 2

If they had, argued Teng, the carriers would have had less money to subsidize other brands' devices. And the Chinese carriers were after more subscribers, pure and simple -- part of a war over which can accumulate the most on its rolls -- not really for the most-valued subscribers, an argument that Apple would have had a better chance of winning.

"Carriers still had to think about [selling] other devices," said Teng. "Because they weren't ready to provide higher subsidies for the iPhone 5C, they had no choice but to raise the original selling price [of the iPhone 5C]."

Chinese consumers are extremely specification- and price-driven, said Teng, with the latter weighing heavily since carriers' models are much different in China than in the U.S., where massive subsidies remain the norm. Verizon and AT&T, for instance, pick up the $450 cost of an iPhone 5C -- Apple's price minus the customer's $99 -- to gain a subscriber who will ultimately pay thousands over the course of a 24-month contract.

As long as Apple continues to price the iPhone at the current levels, Teng said, it will have a tough time competing in the volume business of China.

But other analysts have said, first of all, that that is not Apple's goal, and second, it doesn't need to appeal to the mass market in China, which is dominated by cut-rate Android-based phones, many of them sold by domestic firms.

Independent analyst Ben Thompson, who lives in Taiwan and frequently comments on China's mobile market, has made those arguments since before the revelation of the iPhone 5C's price.

On Tuesday, while discussing the announcement that Apple had hired Angela Ahrendts, CEO of U.K. fashion house Burberry, to run Apple's retail arms next year, Thompson pointed out a recent estimate of the massive size of the Chinese luxury market: A pool of some 27 million consumers purchase one-third of the world's luxury goods.

"One of the many bear arguments against Apple is that the basis of consumption in smartphones is changing from the user experience to price," Thompson wrote on his Stratechery site. "[Instead] Apple seems to be driving the basis of consumption of their products to that of a lifestyle and statement of luxury."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at  @gkeizer, on Google+ or subscribe to Gregg's RSS feed . His email address is

See more by Gregg Keizer on

Copyright © 2013 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
It’s time to break the ChatGPT habit
Shop Tech Products at Amazon