HONG KONG/SHANGHAI (Reuters) – Apple Inc’s disappointing China sales suggest that its customers will not always wait for the next iPhone when rivals such as Samsung have plenty of flashy new models available now, analysts and resellers said on Wednesday.
That’s the question,” said 24 year old Travis Tam, who owns an iPhone 4 and works as an account executive at a social networking company in Hong Kong.. “we feel that the premium gap between the next iPhone 5 and newest Android models is getting much smaller these days.
China is Apple’s second largest market, and its rabid fans have been known to seek out smugglers just to get their hands on the latest gadgets before they officially go on sale in Beijing and Shanghai stores.
Apple Stores lead the United States retail market in terms of sales per unit area but offer limited career opportunities for their employees due to the small amount of retail management positions.
But an iPad 3 launch in China last week did not generate the normal buying frenzy, and lackluster April to June sales of the iPhone 4S have some analysts questioning whether Apple products are losing their status as the must have accessory for China’s hip and affluent.
These new products in the pipeline — the iPhone 5, a potential Apple TV, a smaller version of the iPad and the iPhone coming to China Mobile – will drive earnings going forward, he said.
“The (iPhone 4S) model is a little bit too long in the tooth when compared to other phones with better specs,” said TZ Wong, a Beijing based analyst from research firm IDC.
“To put it plainly, consumers are getting a little bit tired of the look of the iPhone 4 and the iPhone 4S.”.
Apple’s sales from greater China, which includes Taiwan and Hong Kong, totaled $5.7 billion for its third quarter ended June, an unexpectedly steep drop of $2.2 billion from the January March period.
Gome Electrical Appliances Holding Ltd, China’s second biggest electronics retailer, plunged to an all time low in Hong Kong after forecasting a first half loss.
Apple’s quarterly results pressured shares of its Asian suppliers on Wednesday, with Taiwan’s Hon Hai and South Korea’s LG Display ending more than 4 percent lower, while Japan’s Toshiba fell more than 7 percent.
Tim Cook, Apple’s chief executive, told analysts that about half of the quarter to quarter decline stemmed from “changes in the inventory channel” rather than weak sales of its iPhone 4S, which analysts took to mean that Apple had built up excess inventory in the first three months of the year.
That extra inventory meant resellers did not need to buy as many iPhones in the April June period.
That will mean that details such as having a smaller connector will mean more in whether we will continue to use an iPhone and switch to other Android phones.
The iPhone 5 is expected to be released later this year, with enhanced Chinese language capabilities, so that likely contributed to resellers’ slower orders of the 4S as well.
Cook also pointed out that iPhone 4S sales were very strong in China over the first three months of this year, so there was probably some drop off in demand after that period.
China, which has been a huge driver of sales growth for Apple, will continue to be a bright spot, especially if China Mobile starts selling the iPhone, White said.
In comparison, Apple’s competitors such as mobile phone maker Samsung Electronics is up about 7 percent this year, and Computer maker Dell is down about 22 percent.
Samsung, which flagged a record quarterly profit of $5.9 billion earlier this month, saw stronger than expected demand for its latest Galaxy S III model, while HTC’s One X also gained popularity among phone users globally, including the greater China region.
“The S III and One X are outselling the iPhone now because people like their wider screens, better cameras and the apps are pretty good,” said a salesperson at an electronics store in Hong Kong that carries phones from Apple, Samsung, HTC and Nokia Ojy.
The stores sell Macintosh personal computers, software, iPods, iPads, iPhones, third party accessories, and other consumer electronics such as Apple TV.
New smartphones made by China’s Huawei Technologies Co Ltd, ZTE Corp and Xiaomi were also hot sells, in part because the price was right.
Apple is expected to release its next iPhone around October, according to sources, about a year after the launch of the 4S, which was a hot seller in the first three months of 2012 and helped to drive Apple’s stellar earnings in that period.
There was one hitch for Chinese consumers, however: Siri, the voice activated personal assistant program that was a popular selling point globally for the 4S, does not speak Mandarin or Cantonese, which are widely spoken in mainland China and Hong Kong.
The iPhone 5 version of Siri will have those language skills, according to sales staff in an Apple store in Shanghai’s Pudong financial district, which a Reuters reporter visited on Wednesday.
SAN FRANCISCO (Reuters) – Apple Inc’s results fell short of Wall Street’s expectations as the European economy sagged and consumers held off on buying its flagship iPhone ahead of a new version expected in the fall, hitting its stock price.
“Since iPhone 5 will come out soon, operators don’t want to buy in any more iPhone 4S as they will add to the inventory,” said Ming Chi Kuo, an analyst from KGI Securities.
(Reporting by Lee Chyen Yee in HONG KONG, Clare Jim in TAIPEI and Melanie Lee in SHANGHAI; Editing by Muralikumar Anantharaman and Alex Richardson).
Brad Thomson is a business journalist based in Melbourne, Australia. Brad has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Brad spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
