The iPhone 5's lonely debut in China

Apple's (AAPL) iPhone 5 didn't flop in China, but it didn't wow consumers in the largest wireless market either.

According to Reuters, there was one person waiting outside the Apple store in Shanghai's financial district before it opened at 9 a.m., "a contrast to the launch of the iPhone 4 earlier this year when rowdy crowds pelted a Beijing store with eggs."  

Shanghai, by the way, has a population of more than 23 million, which is higher than the areas around New York City  (19 million)  and Los Angeles (10 million).  There may, however, a simple explanation for this phenomena.   Apple wanted to avoid the fights that happened with the debut of the iPhone 4 so it instituted a reservation system that required the iPhone 5 to be pre-ordered through a reservation system, according to a Seeking Alpha contributor. 

Even if that explanation is true, that does mean the iPhone 5 will be a big hit in China. Shares of Apple, which have plunged about 26% over the past three months amid worries about slowing growth, were down in afternoon trading trading on the China reports.

Apple is going to sell plenty of iPhone 5s in China. Smartphone penetration in the world's most populous country is relatively low but is starting to surge, according to Wireless Intelligence. China Telecom has sold the iPhone in 2009 and some of those users are probably going to want to buy the latest iteration of the popular gadget. The iPhone 5 may not be as easy of a sell for Apple as it was in the U.S. and other markets where it has sold out.

For one thing, Apple and China Mobile, the country's largest carrier, haven't been able to come to terms on a licensing agreement, which they have been discussing for years, because of technical issues. Android, Google's (GOOG) free operating system, has about 90.1% of the market, a huge increase from 58.2% a year earlier, according to data cited by BGR.com. Its momentum shows no signs of slowing.

As Reuters notes, Samsung Electronics, Lenovo Group and China-based Coolpad hold the top three spots in the China Market. They each have phones at different price points, which gives them an edge over Apple, and each have relationships with China Mobile, the news service says.

China's importance to Apple cannot be underestimated. About 15% of its revenue comes from the world's most populous country. Apple's investors have the unrealistic expectation that the company will hit a home-run in everything it does. Doing OK, in an important market like China, is not good enough.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.  Story updated at 2:07 pm to add additional information about Apple's China operations.

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