Apple (AAPL) will start selling iPhone 6 and 6 plus in China from Oct 17. The company recently received regulatory approval from The Ministry of Industry and Information Technology (MIIT). MIIT inspects new smartphones before allowing them on Chinese carrier networks.
Last year, Apple shipped iPhone 5S and 5C simultaneously to China along with the United States. However, this time user security and privacy issues delayed the devices in getting the required regulatory approval. Per MIIT, Apple has agreed to improve user security by eliminating risks related to three diagnostic tools in the iOS 8.
The strict scrutiny of Apple’s two devices reflects Chinese government’s growing concern over the security features offered by the U.S.-based companies post the Edward Snowden incident. In July, state-controlled CCTV alleged the iOS 7’s “Frequent Locations” feature could be used to secretly track user’s locations.
However, Apple dismissed the claims stating that it does not have access to phones using the aforesaid feature. It was also rumored that the Chinese government has banned the usage of Apple devices due to security concerns. However, both Apple and the Chinese government have declined any such development.
The new iPhones will be available for pre-order from Oct 10. The 16 GB iPhone 6 will be priced at 5,288 yuan (approximately $860) and the 16 GB iPhone 6 plus at 6,088 yuan. However, reduced subsidy from the three state-owned carriers China Mobile (CHL), China Telecom (CHA) and China Unicom (CHU) will be a concern.
The Chinese government has asked these carriers to control marketing expenses. Per Bloomberg, these carriers will cut spending on subsidies and advertising by a combined 40 billion yuan ($6.4 billion) over the next three years.
Since its partnership with China Mobile, Apple has experienced strong growth in the country. Greater China revenues grew 28% year over year in the third quarter of 2014. Most importantly, iPhone sales jumped 48% from the year-ago quarter.
However, we believe that reduced subsidy will make the iPhones much more premium for Chinese users amid a plethora of low-cost smartphones from Xiaomi Corp, Huawei and Lenovo. Samsung’s recently launched Galaxy Note 4 will further intensify competition for Apple in the near term.
Nevertheless, we believe that pent-up demand for the all-new iPhones will be the key growth catalyst for Apple over the next 12 months. China is Apple’s fastest growing market and we believe that the company will not easily relinquish its increasing market share in the country. Although pricing will be a factor, the bigger size iPhone 6 plus can eventually make a difference in China, in our view.
Currently, Apple has a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment