By Star Chang, posted Jan 30, 2013 at 4:54 AM, 547 views,

Apple Needs a Cheaper iPhone with Bigger Screen for China Consumer

Apple’s revenue in China, including neighboring Hong Kong and Taiwan, totaled $7.3 billion in last quarter, up 60 percent from a year earlier. But there are signs that Apple’s vaunted cachet in the world’s most populous nation is waning. The iPhone 5 have drawn a relatively subdued response from Chinese consumers. According to Taobao.com, the biggest online marketplace in China, iPhone 5 transactions have fallen by half since it went on sale in mid-December. The iPhone is also losing out as consumers opt for bigger screens to watch Chinese soap operas while travelling, or affordable smartphones in the sub-1,000 yuan (US$160) category made by local vendors …

Around half of the more than 60 million smartphones shipped in China in the third quarter last year had screens that were bigger than 4 inches, based on IDC’s latest figures. The iPhone 5 comes with a 4-inch screen, while the Samsung Galaxy Note II’s screen is 5.5 inches. Chinese people seem to prefer a portable mobile device with large screen. Compared with Americans, the Chinese prefer to view more text on a webpage, and at the same time a larger screen can allow them to input Chinese characters more easily. And watching video on a bigger screen is another important factor for Chinese user. The emphasizing of one-hand operation is not so concerning in Chinese market after all. Samsung ‘phablet’ are doing pretty well in these segment. This year, even domestic brand like Lenovo (K900), OPPO (Find 5) are spending more effort to promote their latest 5-inch FullHD smartphone, which cost about 40 percent lower than Samsung products.

Price is a key factor, especially in the Chinese market where around 80 percent of the more than one billion mobile phone users are still on 2G networks. Local vendors such as Coolpad smartphone, which offers cheaper alternatives, and Meizu, known for its minimalist designs, have seen its legion of fans grow. On the online Taobao website, low-end models made by Huawei and ZTE are selling at below 1,000 yuan (US$160), a sweet spot for many casual consumers switching from old features phone to smartphones. The cheapest iPhone on Apple’s China website, a contract free 8-gigabyte iPhone 4, costs 3,088 yuan (US$496). Apple has moved to address that, partnering with local Chinese bank to offer financing and installment options so that buyers can pay with the bank’s credit card when they shop online.

Finally, will Apple release a budget iPhone to compete in China ? The cupertino should resist the temptation to just put out a cheaper iPhone to gain a bigger market share. Introducing a long-rumored lower-cost version of the gadget could backfire by diluting Apple’s premium brand – one of its most valuable assets. And Apple just couldn’t compete the low-price segment with domestic player, which they have a better experience on localization. So what about a bigger screen ? Yes ! a must for the market trends right now. A modern smartphone is not just a phone to make calls, it has transform into a mobile internet device, where people are more often tapping the screen to communicate. We all are starting to adapt on using a bigger screen, there was no turning back for a small screens.

SOURCE: REUTERS