Apple tarnished on late iPhone arrival

Apple needs to work more closely with China's telcos to assure more timely launches for future iPhones, or risk more disappointing launches like the one for the iPhone 5.

PUBLISHED : Monday, 17 December, 2012, 9:57am
UPDATED : Monday, 17 December, 2012, 9:59am

Chinese media are blaming it on the weather, but no matter how you look at it the launch for Apple's (Nasdaq: AAPL) iPhone 5 in China was pretty much a flop. I tend to blame the disappointing launch last Friday on a number of other factors, most notably ineptitude from China Unicom (0762.HK; NYSE: CHU) and China Telecom (0728.HK; NYSE: CHA) that probably cost them millions of yuan in lost sales. At the end of the day, perhaps half the people who buy this kind of trendy product do so as much based on hype than any other factor, since there are many other phones in the market with very similar functionality to the iPhone. But its hard to sustain hype for three months, which is how long it took Unicom and China Telecom to get permission to formally launch the iPhone after the product's high profile global launch.

Chinese media reported few if any lines outside Apple stores on the night before the launch  – a sharp contrast to other recent launches that saw long lines form and even some chaos outside a Beijing Apple store after security officials decided not to open the shop due to safety concerns. Chinese media are being unusually generous to Apple in this case, pointing out a number of reasons for the disappointing opening. The China Daily blames it on snowfall in the Chinese capital, calling the launch "low key" rather than using more negative words like "flop" or "disappointment". 

The Shanghai Daily points out that Apple stores only sold new iPhones to people who pre-ordered them, in a bid to stop scalpers from reselling them on the black market. The report even goes on to call the launch "a hit", saying about 20,000 iPhone 5s were expected to sell in Shanghai in the first day of sales. I don't know how the newspaper defines "hit", but sales of just 20,000 phones in China's largest and most consumer-oriented city for a product that usually generates big hype sounds like a major flop to me.

One online report does actually call the launch "frosty", saying the results were below market expectations and crediting the poor performance with helping to spark a 3.8 per cent sell-off for Apple shares. That report cites one analyst saying pre-orders and bad weather may have been a factor behind the lack of crowds, and another saying iPhone 5 sales probably won't exceed those for the previous model, the 4S, which attracted much more hype.

All this brings me back to my back to my original point, which is that the blame for much of this disappointing launch lies with Unicom and China Telecom, and that Apple needs to work more aggressively with these two companies or risk seeing its China image greatly tarnished if the two telcos continue to bungle future launches.

It's impossible for me to say what happened behind the scenes to lead to the three month delay that took all of the buzz out of this latest launch, causing it to occur in December when cold weather was already likely to dampen enthusiasm for consumers who normally don't mind spending hours in long lines outdoors. I've speculated that China's bureaucracy may be responsible for a lot of the blame, since numerous regulatory approvals are required for the launch of any new phone.

I've also speculated that China Mobile (0941.HK; NYSE: CHL), the nation's largest mobile carrier and the only one that doesn't offer the iPhone, may have used its clout to delay the launch to hurt its rivals. Regardless of the reasons, Apple needs to coordinate better with Unicom and China Telecom on the next iPhone launch to ensure it occurs in more timely fashion, perhaps even at the same time as the global launch if possible.

Otherwise, it could see the iPhone's status rapidly change from "must have product" to "yesterday's news".

Bottom line: Apple needs to work more closely with China's telcos to assure more timely launches for future iPhones, or risk more disappointing launches like the one for the iPhone 5.