Apple Inc. (NASDAQ:AAPL)’s announcement that the iPhone 5C would cost more than $500 in the U.S. and more than $700 in China has been met with a fair bit of scorn from analysts, but Christina Larson from Bloomberg Businessweek spent time talking to upscale, young professionals in Beijing—just the people Apple Inc. (NASDAQ:AAPL) should be targeting—and found that many of them are planning to drop Apple Inc. (NASDAQ:AAPL) for the Samsung Galaxy, which is gaining market share in China.
Apple consumers’ mixed feelings
“A fair number of its customers are still using older iPhones, but they expressed mixed feelings about whether they’ll stick with Apple Inc. (NASDAQ:AAPL) in the future—or opt instead for the larger Android-powered Samsung Galaxy,” writes Larson. “The iPhone 5C is routinely mocked as ‘not attractive’.”
Earlier this month, value investor Mohnish Pabrai took part in a Q&A session with William & Mary College students. Q3 2021 hedge fund letters, conferences and more Throughout the discussion, the hedge fund manager covered a range of topics, talking about his thoughts on valuation models, the key lessons every investor should know, and how Read More
Whether upwardly mobile or unimpressed, people with less money to spend may not be willing to shell out the 4488 renminbi that Apple Inc. (NASDAQ:AAPL) is asking for its ‘cheap’ smartphone. Smartphones are available at half the price, and while they may not be quite as well made and certainly don’t have the same level of brand recognition, a 100 percent premium for someone with limited income is hard to justify.
Growth in China’s smartphone market
China is a rapidly growing smartphone market and it’s probably one of the main motivations for Apple Inc. (NASDAQ:AAPL) to develop a less expensive smartphone in the first place (India being the other), so it’s strange for them to enter the market with a phone that doesn’t appeal to either the wealthy or the growing middle class. Of course, Apple Inc. (NASDAQ:AAPL) has always prided itself on creating markets, and giving consumers something they don’t even know they want. It might simply be that the iPhone 5C is a rare misstep by a company that has accurately predicted consumer taste for more than a decade. Apple Inc. (NASDAQ:AAPL) can always drop prices if sales are disappointing, but the last thing Apple Inc. (NASDAQ:AAPL) wants is to be seen as an actual discount option.
As Larson herself admits, this is hardly a scientific poll, but when a new Apple Inc. (NASDAQ:AAPL) product doesn’t create any buzz, the Apple Inc. (NASDAQ:AAPL) premium that had made the company so profitable is in serious danger.