Can locosto iPhone change Apple’s fate in China, India?

On September 10, it is expected that Apple will introduce iPhone 5S and iPhone 5C, a low cost (locosto) model.

According to industry watchers, iPhone 5S will have slight improvement over iPhone 5 and focus would be on home button embedded fingerprint sensor. On the other hand iPhone 5C will have plastic shelled iPhone instead of an all Aluminum body.

The very next day, Apple is doing an event in China where expectations are high that Apple will announce its long awaited iPhone deal with China Mobile. For LTE, China Mobile has been trialing 25 models and is planning to finalize 15 handsets for commercial use. In 2013, China Mobile is planning to procure more than one million TD-LTE devices and this is bound to increase multi-fold in 2014.


China Unicom and China Telecom, China’s second and third-biggest mobile operator has a combined tally of 266 million subscribers. Both the operators are Apple’s carrier partners in China and Apple would like to benefit by targeting the world’s biggest mobile phone market with more than one billion users.

The announcement of iPhone deal with Chinese operators will help Apple to extend its reach in the emerging markets thereby increasing its market share in China and India, the world’s two largest market in terms of number of handsets. iPhone 5c will compete with ZTE’s Grand Memo LTE and Lumia series in the Chinese market.

Recently, Ministry of Industry and Information Technology has permitted ZTE’s Grand Memo LTE for sale in China and it is the only phone in LTE which is presently marketed in China. The Grand Memo LTE is a quad-band device compatible with the TD-LTE/FDD/TDS/GSM bands and is capable of supporting simultaneous high-speed data transmission and high-quality voice calls.

“As such, it is key for Apple to be able to find ways to drive growth at a higher rate again, and getting China’s biggest carrier on board and launching a cheaper version of the iPhone are both key to doing that. China is a key market for Apple, but its sales have flagged there lately and getting beyond the two smaller carriers is critical for future success,,” said Jan Dawson, chief telecoms analyst, Ovum

It is expected that these locosto iPhones will cost in the range of $350-400 in the open market and will help in increasing Apple’s market share in China. Once Apple is successful in China, we can expect Apple to replicate the model in India by partnering with Indian LTE operators.

Jan Dawson said, “The key challenge for Apple this week is to demonstrate that it can maintain momentum in overall sales of iPhones, and to do so in a way which won’t drive down margins significantly. iPhone sales have now fallen into a fairly predictable cyclical trend, spiking in the fourth quarter of the year, following a September launch, and falling over the rest of the year until a new device in launched.”

The locosto iPhone will help in increasing Apple’s market share in China as many Chinese people cannot afford to buy current generation of iPhones.

The trick for Apple is to position a cheaper  device so that it’s attractive for those that haven’t been able to afford an iPhone before, but is missing enough key features for the new flagship iPhone to remain compelling. That means getting the price for both devices right, but it also means figuring out how to make the lower-cost variant feel like a real iPhone while stripping out significant cost, added Dawson.

All this is win-win for Apple as the company is repositioning from a premium product to a sub premium product in different geographies to increase its market share in the smartphone category.

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