Breakout

Will Apple Have to Sacrifice Its Brand to Succeed in China?

Breakout

According to a report in today’s Wall Street Journal, tech giant Apple (AAPL) is finalizing a deal with the largest cell phone provider in the world. China Mobile (CHL) sports 700 million subscribers and has been squarely in Apple's sights for years. If the deal becomes a reality it could provide a significant boost for Apple’s bottom line. The company’s stock was up marginally on the news in pre-market trading.

Apple has not been absent from China, in fact it’s their third largest market. Still, being able to tap into China Mobile’s vast network would be seen as a significant win for a company whose share price has been battered since last September.

What remains to be seen is Apple’s marketing plan in the world’s most populous nation. The company has had trouble gaining market share thanks to lower cost alternatives.

“To sell them to the masses they gotta bring it down to a price point that’s not good. That’s never been their business model,” says Breakout’s Matt Nesto. He points out that a mass market, non-high-end product is simple not in Apple's DNA.

“Maybe they’ll sell their phones,” he says, “but they won’t discount them and they probably won’t sign up a lot of people.”

According to the Wall Street Journal:

Research firm Trefis said China Mobile may sell about 1.5 million iPhones per month, racking up almost 20 million additional iPhone activations in 2014. An additional 20 million iPhones would represent a 17% increase from Apple's unit sales of handsets in the fiscal year that ended Sept. 28.

Apple watchers will be keeping an eye on what growth in China does to the brand in all their other markets, and perhaps even more importantly, the share price.

“As a stock I would be very afraid if I was short this thing,” says Breakout’s Jeff Macke, adding that a $600 target is not out of the question.

 

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