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The iPhone has launched with relatively weak sales in China, and the situation echoed what the handset faced in India, where the device was launched in August of 2008. There is little demand for the iPhone in India, according to BusinessWeek.
The problem is perhaps structural. Apple (Nasdaq: AAPL) appears to be going into developing nations with the same mindset as it has in the United States -- charge what the market will bear because the iPhone is so cool that people will pay much more than what they'd pay for most other devices. However, what works in the U.S. market may not work overseas, especially in developing nations.
Why is this important to Apple investors? Because the U.S. market is becoming saturated and Cupertino needs to push overseas, particularly in the developing nations where demand is strong.
The two biggest markets for mobile phones -- China and India -- have huge populations and a very strong demand for mobile phones. Their land line telephone infrastructure is relatively poor. However, their populations also make relatively low wages, and so generally prefer utilitarian products to cool ones -- only the elite can afford the latest, most feature-filled gear.
Both countries' populations also have many less expensive options available to them. In India, there's a slew of inexpensive, basic handsets from various manufacturers on the market, while China has that range of choices plus a glut of fake and cheaper gray-market iPhones, as well as homegrown devices such as China Mobile's O-Phone, an Android device.
Nokia (NYSE: NOK), which dominates the market in both India and China, ships a large number of basic handsets -- the simple mobile phones that were more greatly popular in the U.S. perhaps 10 years ago -- to those countries.
Another problem Apple faces is external -- wireless carriers in developing countries are not as willing to subsidize the iPhone's cost as U.S. carriers are, because they have a variety of better-selling, cheaper alternatives which require little, if any subsidies.
Unless Apple seriously rethinks its approach to international markets, its growth may be slowed. Shareholders should keep a wary eye on the company in this respect.
Goodbye, Aunty AT&T?
Meanwhile, reports that Apple is working on a new device that will incorporate a hybrid UMTS/CDMA chip being developed by Qualcomm (Nasdaq: QCOM) are making the rounds. One source is the AppleInsider blog, which says Apple will have the device ready by the third quarter of 2010. This device could work globally and will reportedly be offered to Verizon.
However, reports of Qualcomm developing a new hybrid chip are not true, said Francis Sideco, principal analyst for wireless communications at iSuppli. "Qualcomm has had multiple chipsets that can do UMTS and CDMA in one chip for some time," he told MacNewsWorld.
It's no sure bet Apple is moving the iPhone to Verizon either, he said. "You can't equate Apple with the iPhone," he explained. "There's no reason why Apple couldn't create another device for Verizon."
This could be another version of the iPhone, or it could be the long-rumored iTablet, Sideco stated, adding that his money's on the iTablet.
The iTablet will probably run on Verizon's LTE 4G system, which the carrier is working on building out, Sideco said. "Apple prizes itself on being a premier game-changing company, and it's not going to want to design a brand new device that's on the old EVDO network," he explained. "Apple wants to be the elite of the elite whenever it works with a new operator; it wants to be the headline catcher."
Also, all of Verizon's marketing messages next year will be centered around LTE. "For Apple to go through all the design iterations and certifications just for an EVDO device doesn't make sense to me," Sideco said.
Verizon will insist that the tablet be backward compatible with its EVDO network because it's rolling out its LTE network in stages, Sideco said. Here's where Qualcomm comes in -- a hybrid Qualcomm chipset is the only one that will be able to handle both LTE and EVDO, he explained.
iTablet on the Shelves?
Though rumors about the device have been humming for months, an Apple Tablet will probably hit the shelves no sooner than the second half of 2010, Broadpoint Amtech analyst Brian Marshall told MacNewsWorld.
If the iPhone is added to the Verizon network in 2010, Apple wouldn't likely get Verizon to agree to the $450 per unit subsidy AT&T (NYSE: T) is paying; instead, it would probably get $300 a unit, Marshall said.
Meanwhile, an Android phone that may be the platform's best answer to the iPhone debuted last week. Verizon's Droid, manufactured by Motorola (NYSE: MMI), reportedly sold about 100,000 units in its opening weekend. That's not bad as smartphones go, but it's still unclear whether the Droid alone presents a significant threat to the iPhone.
By comparison, in 2007, the first-gen iPhone took just over 10 weeks to sell 1 million units (10 times more than Droid sold in its first weekend). However, just after the launch of the iPhone 3G in 2008 and the 3GS in 2009, Apple boasted that it broke the million-unit barrier in the first weekend alone.
