Is Apple about to get a big boost in China?

You might want to check in on this stock pick after its September 11 announcement.

By Jim J. Jubak Sep 5, 2013 7:37PM

Now here’s Apple (AAPL) speculation that’s worth getting excited about: Apple has announced that it will hold a product event in China on Sept. 11,  just hours after the Sept. 10 event in California that is almost certain to introduce the new iPhone.


That timing and location has sent Apple watchers into a fury of speculation -- that has focused on the possibility that Apple will finally announce the long-awaited partnership with China Mobile (CHL).

That’s a far bigger potential catalyst for the stock than introduction of multiple colors for a new iPhone.


Image: Businessman in China (© Brooklyn Production/Corbis)Apple and China Mobile, the world’s largest mobile phone operator, have been in discussion for months about the terms of any partnership. China Mobil, with 745 million subscribers as of June, could use the iPhone to help it speed up its push into the 4G LTE network market. Less than one-third of China’s mobile subscribers use 3G phones, and getting more of them to move up to that technology and to 4G is a key to selling more of lucrative services such as video downloads and games.


But as much as China Mobile might want a partnership with Apple to drive its penetration of that market, Apple needs China Mobile more. Apple’s iPhone sales in China fell by 14% in the June quarter, thanks to relentless attacks from Chinese makers of lower priced smartphones.


China isn’t a market that Apple can afford to lose. Sales of smartphones doubled in China in the first half of 2013, according to Gartner. That’s far ahead of the itself impressive 46.5% growth rate for global smartphone sales in the second quarter.


That dynamic has given China Mobile leverage in negotiations to push for a cheaper iPhone that’s more competitive in the Chinese market -- it looks like the company will get that with a low-cost model with a plastic case, that is rumored to be part of the Sept. 10 product introduction -- and for as lower subsidy by the network operator than Apple has traditionally negotiated in deals with, say AT&T (T) and Verizon (VZ).


Analysts at UBS forecast that Apple could sell 17 million iPhones through China Mobile in 2014. How profitable those sales might be will depend on the deal, if any, that Apple strikes with China Mobile.


Apple is a member of my Jubak’s Picks portfolio.


Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio.


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3Comments
Sep 6, 2013 3:03PM
avatar

Apple makes small devices that monopolize the time and attention of the users- mainly younger people who rely on it and don't know any manual processes.

China is a massive nation undermining global competence with devices that monopolize the time and attention of the users- mainly younger people who rely on it and don't know any manual processes.

China also told Obama NOT to taper off QE. They have been the primary recipient of those funds by buying into stocks and taking when fund groups follow. Notably, China has also been found guilty of hacking our services.

 

Does it really take rocket science to figure this one out. See if there's room in jobs' grave plot for Apple and save us from obliteration by the Chinese.  

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