Although Apple Inc. (NASDAQ:AAPL) commands 18 percent of the global market share, analysts at Nomura see little benefit for the company in spite of their increased global smartphone estimates. They believe the main beneficiaries of their increased estimates will be Asian smartphone vendors manufacturing low-end Android phones.

Apple Logo

Apple’s Problem With ‘Good Enough’ Android Phones

In one report released to investors this week, Nomura analysts said “good enough” Android smartphones spell doom for Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V). In a separate report, they said these same handsets will leave Apple Inc. (NASDAQ:AAPL) “flat-footed” through the development of emerging smartphone markets.

Apple’s Rumored Low Cost IPhone Has Yet To Materialize

Analysts Stuart Jeffrey and Woo Jin Ho explained why Apple probably isn’t aligned with the current growth drivers of the smartphone market. In a nutshell, the company currently only addresses the high end market because the low-end iPhone has yet to make an appearance.

In their view, smartphone buyers in the Asia-Pacific region will drive between 70 and 79 percent of growth. In the first three months of the year, Apple Inc. (NASDAQ:AAPL)’s share in the Asia-Pacific region was only 13 percent. They say this is because those “good enough” Android phones carrying a $100 or lower price tag are the drivers of most of the growth.

They believe Apple will launch a low-cost iPhone but expect it to provide only a limited increase in market exposure. They believe the low-cost version will cost around $400, which is probably too expensive to give Apple a significant increase in market exposure because it can’t compete with the $100 Android phones. In addition, they see cannibalization as a big problem in the introduction of a low-cost iPhone.

Other Problems For Apple

The other big problem they see for Apple Inc. (NASDAQ:AAPL) is its lack of an iPhone with a larger screen. They said smartphones with a 5-inch screen are driving the high end smartphone market growth.

In addition, app development throughout the Asia-Pacific region is primarily focused on Android, which gives Android phones another edge over Apple in the region.

Growth Catalysts For Apple

Nomura analysts don’t see all negatives for Apple Inc. (NASDAQ:AAPL). They said since it generally takes companies a year or two to change product development after management realizes that changes must be made, Apple will continue to face operational challenges at least until next year.

Other big catalysts for the company that are coming up sooner will be the iOS 7 reveal in June at WWDC and new iPhones in September.

Nomura analysts remain neutral on Apple Inc. (NASDAQ:AAPL) and have given the stock a price target of $420 per share.