The one thing Apple has going for it in China is cachet. And that’s why Tom Doctoroff, Asia Pacific CEO of ad agency JWT thinks offering an inexpensive iPhone to the Chinese is a very bad idea.
"One of the golden rules of marketing in China is that anything displayed in public can command a huge price premium," says Doctoroff. "And the reason for that is status is a primary driver here, much, much more so than in the West. So when you offer an inexpensive iPhone, it immediately signals that this isn’t so elite anymore."
Buzz for the iPhone has been wearing off here. A report from global analyst Canalys shows that in the last quarter, the iPhone fell from fifth to seventh most popular smartphone in China. It was overtaken by the Chinese firm Xiaomi, which just released a new affordable phone that’s generating a lot of hype.
Charlie Custer, who edits the blog Tech in Asia says Apple won’t be able to compete with a new slew of Chinese phone makers like Xiaomi on price.
"Even the cheap iPhone is going to come in above what the Xiaomi costs," says Custer. "So then it’s not a luxury phone, but it’s not as inexpensive as this really nice inexpensive phone. So who exactly is going to buy it? I’m not sure."
The answer may come this week. Apple’s been in talks with China Mobile to help sell the iPhone. It's the world's largest telecom company, with 745 million subscribers. If that deal comes through, then iPhones -- inexpensive or not -- will suddenly have a market more than twice the size of the one at home in the U.S.