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Apple's iPhone sales fail to flatter on mainland debut

(China Daily/Agenceis)
Updated: 2009-11-05 08:44

Apple Inc's mainland partner sold fewer iPhones than analysts anticipated in the product's debut last week, raising concerns the price is too high to attract customers in the world's biggest mobile phone market.

China Unicom (Hong Kong) Ltd said it sold 5,000 iPhones since the Beijing-based carrier began offering the product on Oct 30. The phone costs as much as 6,999 yuan ($1,025), compared with $299 in the US. Unicom's version of the iPhone also lacks the Wi-Fi networking features available in other markets.

The sales figures were disappointing compared with results in other markets, said Paul Wuh, an analyst at Samsung Securities. The iPhone 3GS sold 1 million units within three days of its June debut in North America and Europe. That dwarfed the sales in the Chinese mainland, a market that Apple Chief Operating Officer Tim Cook sees as a "priority project" for the company's expansion.

Unicom's price for the most expensive iPhone model is 26 percent higher than in Hong Kong. Even so, the difference is smaller when taxes in the two markets are taken into account, Unicom President Lu Yimin said. Demand has been "quite good", he said.

The mainland sales in the first four days were disappointing and "soft", said Gene Munster, an analyst with Piper Jaffray & Co in Minneapolis. Judging by the original iPhone's US release in June 2007, the mainland debut should have generated sales of about 30,000, he said.

Prices will drop over time, helping the mainland's iPhone shipments reach 1 million to 2 million in Apple's fiscal year, which ends next September, Munster said. That's out of a total of 36 million units, he said.

"We believe that eventually the Chinese mainland will emerge as a major market for iPhone sales, but it could take a year or two to gain meaningful unit traction as it did in the US," said Munster, who rates Apple "overweight" and doesn't own the shares.

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Cupertino, California-based Apple's "initial sell-in" in the mainland via Unicom was expected to be about 500,000 iPhones, Ben Reitzes, a Barclays Plc analyst, said in a report, without defining the timeframe. Demand will increase to several million handsets over the next few years, he said.

Initial sales data for the mainland underscore the challenge faced by Apple in selling the iPhone in emerging markets, said Aloysius Choong, an analyst at researcher IDC. Only "tens of thousands" of the device have so far been shipped in India.

China had 719.8 million mobile phone subscribers at the end of September, according to official data. India, the second-biggest wireless market by users, had a total of 456.7 million at that month's end, according to official statistics.

Apple declined to comment on the sales, said spokeswoman Natalie Harrison.

The lack of Wi-Fi means that Unicom's iPhones can only connect to the Internet via mobile-phone connections, rather than local wireless networks.

Unicom "is selling a 'castrated' version of iPhone at a higher-than-market price", Allan Ng, a BOC International analyst, said in a report last month. Demand has been lackluster, Ng said.