Cheap iPhone Reduces Apple Brand Value

Against a background of high revenue and net profit, Apple's stock price on the 24th January fell by a straight line from US$514.01 to US$450.50, a fall of 12.35%. On January 30th, Apple's closing price was $456.83, which is still down by nearly 11% compared to the $514.01 before the release of earnings.

The strange stock price performance is due to investors’ bearish view on innovation-driven “Apple Premium”.

The apple that was pulled down from the altar, wants to enlarge and open up the Chinese market to save oneself, but the effect is doubtful. Recently it has been rumored that Apple will push the rumors of the low-cost iPhone. It may be difficult to play the role of a savior, but it may become another evidence of Apple's rapid decline into the mortal world.

iPhone5 attractive drop /

The "abnormal" performance of Apple's share price, the secret is hidden in the "structural interpretation" of financial sales data.

"Daily Economic News" reporter noted that the main contributors to Apple's earnings report are i-Phone and iPad, but the sales structure of both has caused investor concern.

Take the iPhone 5 as an example. According to the survey data released by the market research agency ConsumerIntelligenceResearchPartners, in the fourth quarter of 2012, iPhone 5 accounted for nearly half of iPhone sales, iPhone 4S accounted for about 1/3, and 18% for iPhone 4. This situation and the 2011 Apple iPhone4S formed a great contrast when the iPhone4S sales accounted for nearly 75% of the iPhone's total sales.

Recently, the latest financial report data released by US operator Verizon also proved that the iPhone 5 is losing its attractiveness. The data shows that in the fourth quarter of 2012, only half of the iPhones shipped by Verizon were iPhone 5s, and the rest of the users chose the lower-priced iPhone 4 and iPhone 4S.

In the Chinese market, the iPhone 5 has not been sought after by the previous models.

"Daily Economic News" reporter found in the market survey, iPhone5 since the listing in the mainland in December last year, operators have begun price cuts.

At present, the price of the official iPhone5 (16GB) retail store is still 5288 yuan, while Beijing Telecom has lowered the contract price of the iPhone 5 (16GB) to 4866 yuan, and channel distributor Dixon has reduced the price to 4,580 yuan.

A salesperson of the operator stated that “Compared with the iPhone 4 and 4S, the impact of new products is worse than before. From the current situation, the market performance of the iPhone 5 is general. After all, now an iPhoen4 only sells around 3,000 yuan, and the performance difference is not great. We have a meeting every day to discuss how we can improve our performance, and we may be able to sell at a reduced price."

This is in sharp contrast to the fruit queuing in Apple's i-Phone 4S in 2011.

According to IDC's survey data, i-Phone5 has sold more than half of the iPhone's older phones since the listing in September of last year. The report pointed out that since the launch of the iPhone 5, Apple iPhone sales have been largely attributed to older models.

iPadMini is accused of turning to price-driven/

After the launch of the iPhone 5, Apple began to make subtle changes in the model of innovation-driven consumption, leading to panic in the capital market. However, the iPadMini's popularity after its listing has also triggered unease in the capital markets.

In Apple's new products, the iPad Mini attracted particular attention, once appeared in the market "a machine hard to find" phenomenon.

At present, Apple's official website WiFi version iPadMini (16GB) is priced at 2,498 yuan, buyers need to wait for three to five working days after the order to get the goods, and each customer to purchase two at a time.

"Daily Economic News" reporter surveyed in Beijing's Zhongguancun, an Apple salesperson said, "In the past when the iPad was listed, the price of parallel imports are down 5,000 yuan, and now 2498 yuan can buy a new Apple iPad Mini, in Dare to think about it. Near the Spring Festival, this product is very popular, because the screen size and price are very suitable, there are many companies centralized procurement as a prize and gifts."

Sun Yongjie, an IT commentator, said that in the fourth quarter of 2012, iPad’s overall sales reached a new high, with the iPad Mini playing a significant role. However, the iPad Mini's profit margin is much lower than that of the iPad, and apart from the small screen size, it is difficult to find differentiated innovations. The iPad Mini's popularity shows that Apple's competitiveness in the tablet PC market has begun to shift from value-driven to price-driven. This shift made investors start to doubt the original "Apple premium" space.

As the two major contributors to Apple's financial report, the icy cold of the iPhone 5 and the hot iPad Mini all indirectly caused a discount to the "Apple premium", which caused Apple's share price to fall.

Excavate the Chinese market for self-help/

It is worth noting that the transformation of Apple's sales structure is not only reflected in the product structure but also in the regional distribution.

After the listing of the iPhone 5, in addition to the decline in the popularity of the United States market, in the Asian market in Singapore and other markets, iPhone "fatigue." As a result, Apple has set its sights on emerging markets such as China.

“The penetration rate of smart phones in China is 24%, and the United States has reached 48%. The general industry penetration rate is 50% at a time, 50% below the rapid development of the market, and more than 50% will enter the slow phase.” Analyst International Analyst Li Yanyan told the reporter of the “Daily Economic News” that China has provided Apple with a market space that can be tapped both in terms of consumer potential and market space.

Apple's financial report data also shows this.

For the first time in 2013, Apple's first-quarter financial report was singled out in Greater China. The revenue in this region reached US$6.83 billion, a year-on-year increase of 67%, and the growth rate was far ahead of other regions. However, the proportion of China’s revenue in Apple’s global revenue is still low, at 12.5%, which is far below the 37% in the Americas and 23% in the European market.

Apple is moving in the direction of expanding the Chinese market.

On January 10th, Apple CEO Cook met with Chairman Guo Guohua of China Mobile to discuss "cooperation matters" and revealed the signal to further explore the Chinese market.

Another news further strengthened this signal.

Recently, news that Apple will enter the establishment of a research center at Yuanshen Road, Pudong, Shanghai, will be heard in the second half of this year. However, on January 30, science and technology blog site AppleInsider cited relevant sources that Apple's Shanghai Pudong registered agency will be responsible for the company's supply chain management in Southeast Asia, not the previously considered R & D center.

It is worth noting that Cook had previously been responsible for Apple's global supply chain management. If this time setting up a supply chain management organization in China, the intention to strengthen the sales efforts in the Chinese market will leap to paper.

However, Apple's practice of only using the Chinese market as a product sales area may hinder the pace of maximizing the value of the Chinese market.

Sun Yongjie thinks that "Apple needs to strengthen its research on China's domestic market and increase the development of localized applications in the Chinese market in order to more effectively expand Apple's market share in the Chinese market."

Cheap iPhone rumors /

Although Apple has revealed the trend of exerting power in emerging markets, due to the high positioning of Apple products, sales in emerging markets are already facing challenges.

With the weakening and high positioning of innovation, Apple is gradually being attacked by Samsung, HTC, and Huawei in the Chinese market. IDC released the third quarter of 2012, China’s smartphone rankings, Samsung ranks first, Lenovo, Huawei, ZTE and Coolpad rank 2 to 5, respectively, and Apple has slipped to sixth.

An Apple salesman admitted to the reporter of "Daily Economic News" that "currently Samsung has the greatest impact on Apple."

Neil Mawston, an analyst at American market research firm StrategyAnalystic, believes that full product line layout is the key to Samsung’s market share leading Apple, and Apple’s iPhone is relatively single.

IDC data shows that in the fourth quarter of last year, Samsung’s smartphone market share increased from 22.5% in the same period last year to 29%, while Apple’s share dropped slightly from 23% to 21.8%.

In the face of changes in market share, Apple has begun to adjust, which can be seen from the expansion of the iPhone screen from 3.5 inches to 4 inches. Moreover, Apple CEO Cook has shortened the product update cycle from December to 6 months, and the price of the product has also declined.

Neil Mawston believes that Apple will launch the iPhone Mini mobile phone in 2014 to seize the low-end market and compete against Samsung.

Recently, foreign media iLounge leaked cheap spy photos of iPhone exposure. The exposed models are made of plastic and are said to be equipped with a 4-inch screen with a resolution of 1136×649. It is said that the price of cheap iPhone is about 350 US dollars. However, the above news did not get Apple's response.

Although the rumors of cheap iPhones have not been confirmed, Sun Yongjie does not favor Apple's low-cost route. "Apple is being sought after by investors because of its ability to innovate and its brand premium. If low-end products are introduced, it will inevitably reduce profit margins and intensify the trend of not increasing profits in the latest earnings reports. The stock price will be further negative."

Samsung’s latest financial report shows that in the fourth quarter of 2012 (October-December) IT and mobile communications sales increased by 50.7% year-on-year to 31.32 trillion won (approximately US$29.24 billion), and operating profit increased 112.5% ​​year-on-year. It was 5.44 trillion won (approximately 5.08 billion U.S. dollars). Apple’s fourth-quarter financial report showed that total revenue for the quarter was US$36 billion, a year-on-year increase of 27%; net profit was US$8.2 billion, a year-on-year increase of 21%.

It can be seen that while Samsung’s shipments exceed Apple’s, Apple’s profits are still much higher than Samsung’s.