China Mobile-Apple deal imminent, but what’s next?
The official arrival of the iPhone at China Mobile is expected this week
Apple and China Mobile are very close to finalize an agreement for the official arrival of the Apple’s iPhones on the Chinese market. China Mobile is currently world’s largest wireless operator with more than 759 million subscribers. The deal will open this huge market for Apple, which is expected to deliver more revenue to the US manufacturer. Approximately $3 billion could be generated in 2014 helped by the iPhone’s arrival in China, according to analyzers.
China is the second largest market for Apple. The company has generated $25.4 billion net sales for the fiscal year ending in September 2013. This accounts for 15% of the overall net sales ($170.9 billion). Probably, there will be a huge demand for iPhones at the beginning. However, at a later stage, the so-called “initial haul” will stop distorting the market and the iPhone sales will normalize. When that happens, Apple will face again the familiar battle with Samsung for more customers.
After the gold rush, Apple needs to rely entirely on its marketing strategy, which will be a deciding factor for the market growth. Here, the company will face the very aggressive marketing policy of Samsung. The Koreans are spending $14 billion on marketing in 2013, which is the highest proportion of advertising expenses from all top 20 companies by sales. While Samsung spends 5.4% of its annual revenues, Apple’s marketing expenses are just 0.6%.
Another problem for Apple would be the customer preferences in China. The market is still dominated by cheap Android models, while Apple’s products are far more expensive. More than 88% of all sales are for smartphones cheaper than $500, shows a new market research. That said, it doesn’t mean that Apple won’t have customers, but it’s unreal to think that the company can beat Samsung in market share.