It's become a fall tradition for Apple Inc. (AAPL) to host an event debuting the year's new iPhone. That tradition underwent a singificant change this year, when on Sept. 9 Apple unveiled not one but two new iterations of their famous flagship product at an event at their Cupertino, Ca. headquarters.
The first, an upgraded iPhone dubbed the 5S, adds more features, improves upon the processor of the 5, and represents a continuation of standard Apple strategy. Of much higher interest to analysts, and an indication of the way the smartphone market is evolving, is the second new product, a low-end iPhone dubbed the 5C.
The cheaper iPhone, which at $99 (with a two-year contract) will cost one hundred dollars less than the 5S, is indicative of the need of smartphone companies to penetrate into emerging markets to survive. Apple has been crushed in emerging markets, notably China, where the company is a distant fourth at 9 percent of the market. This failure to adequately break into China was a major reason why this year marked the first since the invention of the smartphone market that Apple could no longer claim to be the world’s most profitable smartphone maker, a title they lost to Samsung.
With the more affordable iPhone 5C Apple is announcing they are ready to make a major play in the Chinese market. The phone could also indicate that Apple is coming even closer to closing in on a deal with China Mobile Ltd. (CHL) , China’s largest mobile carrier. Apple has so far not been able to reach an agreement with China Mobile, who remain reticent to offer discounts for iPhones to customers in exchange for service, a practice Apple insists upon.
The Chinese smartphone market is expected to triple by 2015 to reach $30 billion in value. Apple has an event scheduled in Beijing late Tuesday, when they may provide an update on the China Mobile talks.
Apple is putting it all on the line with the iPhone. The wildly profitable line was the major star of Apple’s last quarterly earnings report, moving 5 million more units than expected. As tablet sales suffer from increased competition, and a wildly inventive product like Google Inc.’s (GOOG) Google Glass has yet to materialize for Apple, making a successful play into China with a cheap iPhone appears to be Apple’s best bet to once again regain their place atop the world’s smartphone market.
Apple is down 2.29 percent to hit $494.58 a share. They're down 7.81 percent on the year.
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