When Apple Inc. (NASDAQ:AAPL) released its latest quarterly results, several analysts pointed out that the company’s results from China were disappointing. However, that story could change with the release of the rumored low cost iPhone.
Research firm Canalys reports that right now the iPhone is the seventh most popular handset in China, which means Apple Inc. (NASDAQ:AAPL) still has plenty of market share to gain there. A third of all smartphones sold in the world are sold in China now, according to CNN Money. That’s more than in the U.S., the U.K., Japan and India combined.
Apple’s low cost iPhone could be a market disrupter
Morgan Stanley analyst Katy Huberty issued a report to investors explaining the possibilities she sees for the device. She thinks that it will give Apple Inc. (NASDAQ:AAPL) an additional 13 points of market share in China alone.
In addition to the benefits it will provide to Apple itself, she also notes that Apple Inc. (NASDAQ:AAPL) suppliers Pegatron Corporation (TPE:4938) (OTCMKTS:PGTRF), Foxconn Technology Co., Ltd (TPE:2354) (OTCMKTS:FXFCOF) and Hon Hai Precision Industry Co., Ltd (OTCMKTS:HNHPF) (TPE:2317) will receive a boost.
Huberty believes that competitors like Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) and HTC Corp (TPE:2498) may have to step up their efforts in order to stay competitive with Apple Inc. (NASDAQ:AAPL)’s new low cost handset.
Apple’s EPS could receive a boost
The company could see a $4 per share boost in earnings per share, in Huberty’s estimates. She believes Apple Inc. (NASDAQ:AAPL) could ship 20 million more smartphones with the addition of the handset. In addition, she believes that China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s support of the handset will add 12 million more units and an additional $2.50 per share in earnings. With the addition of China Mobile, she believes Apple Inc. (NASDAQ:AAPL) will receive six more market share points.
The analyst predicts that Apple Inc. (NASDAQ:AAPL)’s low cost iPhone will be sold for around $399, which is still lower than the amount Chinese customers had said they would pay for the device. AlphaWise reported that would be willing to pay up to $486 for the low cost iPhone.
However, BGC Partners analyst Colin Gillis told CNN Money that he doesn’t think the $400 price tag will be low enough for the Chinese market. Also a formal deal has not yet been announced between Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (NYSE:CHL) (HKG:0941), although the companies’ CEOs met recently for negotiations.
