Demand Outpacing Supply for iPhone 4 in China

Despite very high costs, iPhone is selling out in China

   

Demand Outpacing Supply for iPhone 4 in China

Steve Jobs has had a good year. In January, his company Apple Inc. (NASDAQ: APPL) announced the iPad, a 9.7-inch tablet computer that Jobs claimed would transform the portable computer market. When the tablet launched in April, it was impossible to buy the device at a retail outlet or even online. Supply for the device only caught up with demand in August. Just two months after releasing the iPad, Apple announced the latest iteration of their popular smartphone, the iPhone 4. The new iPhone’s launch was auspicious; this was the most significant hardware upgrade to the machine since the release of the iPhone 3G and it was heavily expected that this phone would be the last to be exclusively supported by mobile carrier AT&T (NYSE: T). When the iPhone 4 did release at the end of June, it was plagued by negative press and user feedback thanks to an overly sensitive antenna casing that would cause calls to drop is the user didn’t hold the phone gingerly. Some thought that “Antennagate” would finally end the iPhone’s reign over the smartphone market. Then the device sold 3 million units in its first three weeks.

Yes, it’s been a very good year for Mr. Jobs and his machines. Millions of Americans have bought the iPad and the iPhone 4, millions more are clamoring to get them. For all of their domestic success, however, Apple Inc.’s greatest victory has been the steady penetration of the biggest mobile market on the planet: China. Since the country lifted their restrictions on what Wi-Fi protocol smartphones can use in July, APPL has staggered the release of multiple versions of both its iPad and its iPhone line, starting with a Wi-Fi enabled edition of the iPhone 3GS. Despite the roll out of so much tech though, analysts have questioned whether Apple could replicate their success in the United States in a country where cheap pirated mobile technology is king. Even with three new Apple Stores in China’s biggest cities, Wi-Fi enabled versions of the iPad and iPhone, and the support of China biggest mobile carries, China Unicom, could Apple really sell their incredibly expensive devices? If last week’s release of the iPhone 4 is anything to go by, Apple’s going to take China by storm.

Apple and China Unicom released the iPhone 4 on Saturday, commemorating the opening of new Apple Stores in both Shanghai and Beijing. The smartphone cost CNY 5,880 (around $874) and that’s with a mandatory two-year contract. The high price point coupled with the slow start previous versions of the iPhone have had in China—the iPhone 2G sold just 100,000 units in its first six weeks in 2009—led analysts to believe that the iPhone 4 would have a quiet weekend and modest sales going forward. So far, though, Apple and China Unicom are unable to keep up with the demand for the smartphone. Unicom received over 200,000 pre-orders by September 25th, and over 40,000 new iPhone users purchased the device and the mandatory two-year contract. For the first time in China, Apple’s supply line isn’t meeting with consumer need for their latest handheld. As of now, the iPhone accounts for 7.1% of all smartphones shipped in China, putting Apple in fifth place in the market. The iPhone 4′s debut is promising enough that Steve Jobs can start making plans to take the number one spot. Apple’s goal is to open 21 more Apple Stores in China before the end of 2010. A good year indeed.

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.


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Article printed from InvestorPlace Media, http://investorplace.com/2010/09/demand-outpacing-supply-iphone-china/.

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