Apple losing in China

While the Tame Apple Press was trying to tell the world that Apple was going to do well in China, TechEye received a good kicking from Apple Fanboys for daring to say it was not going to happen.

Well it looks like we were right and anyone who invested in Jobs’ Mob would have a case for suing the New York Times and its ilk for trying to talk up what was obviously false.

Apple is in trouble anyway – it had a disappointing March-quarter revenue forecast, coupled with surprisingly weak holiday iPhone sales, but what is interesting is how much the Tame Apple Press over-estimated initial demand from China Mobile’s 700 million-plus subscribers. This 30 million units a year over-estimation pushed Apple’s share price up 18 percent higher in the fourth quarter.

The shortfall raises doubt about the country’s appetite for its devices as well as broader concerns about flagging global demand for smartphones and tablets. Apple and China Mobile struck their deal in December, and iPhones went on sale in January.

The reason for the failure however was obvious. Apple was going to trot out its same business model in China that it did elsewhere using products which were expensive and more or less the same as that which was already in the market. After all that works in America, where Apple Fanboys have dosh to spend and tend to fall for marketing easily.

However in China, not only are buyers more sensible, they also have a lot less money to waste. The iPhone was selling for $740 which is about a tenth of the average urban income of $7,600. There was also insufficient high-speed 4G wireless coverage to make the phone worthwhile and persistently stiff competition from local players such as Huawei and Xiaomi.

Apple arrogantly refused to adapt and evolve for the Chinese market. Its doom was obvious. So what are the Tame Apple Press saying about this disaster and their own inability to see the obvious? Its iPhone 5C, which many had hoped would finally grant it an unassailable foothold in the market, was just $100 cheaper than the high-end 5S.

Apparently iPhone buyers may also be waiting for the next iteration, which is widely rumoured to adopt the larger screens that Samsung Electronics and other rivals have proved can be more popular with Asian buyers!

That is right, Apple is going to produce yet another expensive handset following the design of its more competent rivals. Yeah, that should do it. People often buy a more expensive version of technology which is already out there.

The other part of the reality distortion field is claiming that Apple will do better when China Mobile’s high-speed 4G mobile networks start to spread. There are only 16 cities covered so far.

However that bonus will work in favour of all Apple’s rivals too, who all have 4G offerings ready at a price which is much cheaper than Jobs’ Mob.

Yesterday Apple CFO Peter Oppenheimer and Cook argued that investors should not be too fixated on that sales forecast, saying underlying demand remained strong. In other words don’t look at the quality feel the width.

While Apple still keeps doggedly hanging on to its increasingly out of date business model it is going to get more and more of a kicking from its rivals.