Does Apple Need This China Quick-Fix?

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Apple (NASDAQ:AAPL) will need to set aggressive prices on older models of its smartphone in China alongside the launch of the new iPhone 5 if it wants to gain a significant share of the market, according to an analyst. RBC Capital Markets’ Mark Sue wrote in a note to investors on Friday that with Google (NASDAQ:GOOG) Android manufacturers pricing several smartphones fairly low in the rapidly growing smartphone market, Apple will be forced to react.

“Apple may need to be competitive on price in order to compete with its Android-based peers at the low end and the middle tier of the market if the company has higher unit ambitions in mind,” Sue wrote, according to Investor’s Business Daily. “Apple’s market share position in China has been lumpy and driven by product cycle launches.”

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The analyst predicted smartphone unit sales in China to grow from 90 million in 2011 to 150 million this year, 185 million in 2013, and 200 million in 2014. Of that, the second quarter saw a 21 percent share for Samsung, while Apple brought in 11 percent.

“Apple will now position iPhone 4 at the lower end of the [Chinese] smartphone market, although Apple could consider iPhone 3GS in China,” the analyst added. “Competing in the lower end of the Chinese smartphone market with its iPhone 3GS/4 suite of smartphones would generate solid unit numbers in the region without significantly compromising on the margins, in our view.”

While China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) already have the iPhone on their respective network, Apple is yet to work out a deal with China Mobile (NYSE:CHL), the country’s biggest carrier at 170 million subscribers. According to a different report on Friday, the deal between the iPhone maker and China Mobile was reportedly being delayed because of subsidy concerns from the country’s government, which owns the wireless operator.

Sue stressed that the top carrier was key to Apple’s future. “China Mobile remains the largest variable for Apple’s iPhone prospects next year,” he wrote.

The analyst said he expected the iPhone 5 to be launched in mainland China in or before January next year.

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