iPhone 5 launch: another China snub?

Apple is unlikely to include China in its global launch for the iPhone 5, though there's still a small chance it could include the market in its plans under a deal with China Telecom.

PUBLISHED : Thursday, 06 September, 2012, 10:29am
UPDATED : Thursday, 06 September, 2012, 10:44am

With the buzz rapidly rising about the upcoming launch of the newest iPhone, being dubbed the iPhone 5, an equally low-key buzz is starting to build over whether Apple (Nasdaq: AAPL) will include China on its global launch map for the product or snub the country once again. On a conceptual level, the question should be a no-brainer for Apple, due to the huge importance of the China market to its business. But for other reasons which I'll explain shortly, Chinese media are already predicting that Apple will once again snub China with the latest high-profile launch, which is expected in the next 2 weeks.

There's no question that China has rapidly risen to become one of Apple's most important markets. China now accounts for about one-fifth of Apple's global revenue, most likely making it the company's second or third largest market after the United States. That figure is a huge change from just 2 years ago, when China accounted for a tiny 2 per cent of Apple's global revenue.

The number reached the 20 percent level in Apple's fiscal second quarter this year, as the company clinched a new deal to offer its iPhones in the market through China Telecom (0728.HK ; NYSE: CHA), the smallest of China's 3 wireless carriers. Before the China Telecom tie-up, Apple previously offered iPhones in China through a deal it signed in 2009 with China Unicom (0762.HK; NYSE: CHU), the nation's second largest wireless carrier.

Yet despite the widespread availability of iPhones and other Apple products in China, the market has been a difficult one for Apple, with the result that the company has yet to include China in any of its big global product launches. Despite their partnership of 3 years, Unicom and Apple have never developed a very close relationship. The companies bickered from the beginning about Apple's desire to sign a revenue-sharing agreement for iPhones in China, with Unicom reportedly ultimately winning that battle in 2009.

Since then, Unicom's promotion of iPhones in China has been repeatedly lacklustre, perhaps because Unicom didn't feel it needed to do very much since it was the only company offering iPhones in China for most of the last 3 years. As a result of this stiff relationship, Unicom and Apple seem to lack any deep commitment to each other, with the result that China has never been included in a global iPhone launch yet.

Apple has had an equally uneasy relationship in China for its iPads, which were the subject of a high-profile trademark dispute earlier this year. Apple finally settled the matter, but only with great reluctance after immense pressure from Beijing.  As a result of that, the latest iPad didn't debut in China until months after its global release.

Last but certainly not least, Apple is the source of regular negative publicity by both Chinese and international media that love to show how the company's China-based production partners, most notably Taiwan's Foxconn International (2038.HK), abuse their workers with low pay and long hours.

With all that mistrust in the air, it's not too surprising that Apple has repeatedly ignored China in the launch roadmaps for all of its latest new hot products. Look for that tradition to most likely continue with the iPhone 5 launch, though there's still a small chance that Apple could include China in its plans under a deal with China Telecom, which seems to be developing a more positive relationship with the US tech giant.

Bottom line: Apple is unlikely to include China in its global launch for the iPhone 5, though there's still a small chance it could include the market in its plans under a deal with China Telecom.