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You are here: MacNN Forums > News > Tech News > Analyst: China Mobile deal may be held up over iPhone 5c

Analyst: China Mobile deal may be held up over iPhone 5c
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Dec 20, 2013, 01:20 AM
Analyst Ming-Chi Kuo of KGI Securities, who just two months ago surprised investors by saying that first-weekend sales of the new iPhone models were likely to have been evenly split between the constrained iPhone 5s and the colorful iPhone 5c, now believes that the iPhone 5c will be outsold by older models of iPhone -- both the still-supported iPhone 4s and scarcer but still in-channel iPhones 5 and 4 -- and that its alleged low sales may be holding up the China Mobile deal.

"We believe a deal is nearing completion," Ming-Chi told investors in his latest memo, but that "weak sales" of the iPhone 5c in China may be forcing a re-evaluation of terms between the world's largest carrier than Apple. He added that his latest survey suggests that the iPhone 5s is far more popular than the 5c among buyers who can afford the latest iPhones, speculating that Apple will only ship between one million and 1.5 million 5c units during the current calendar quarter to China Mobile, whereas the 5c was originally predicted to make up 30 percent of those iPhone sales.

Ming-Chi predicts that Apple will sell just 15-20 million iPhone handsets to China Mobile customers in 2014, below the consensus estimates of 17 million (or about 10 percent of China Mobile's existing 178 million 3G customers). While he still believes the worldwide sales for Apple's iPhones is strong -- predicting 52.7 million sold worldwide during the current quarter -- only 7.2 million of that figure will come from the iPhone 5c, he thinks, with 36 million sold of the iPhone 5s and combined sales of older iPhone models of 9.3 million. If accurate, this would be a 56 percent rise in overall sales from the previous quarter, where Apple sold 33.8 million units -- but represents a seven percent drop from Ming-Chi's previous estimates and a 35 percent drop in iPhone 5c sales from previous estimates.

A portion of this revised estimate may be due to high "channel fill" Ming-Chi mentioned during his September predications on iPhone shipments. Outside of China, the iPhone 5s has also been outselling the iPhone 5c, but by approximately a 3-to-1 or 4-to-1 factor depending on region.

This is normal behavior for the "middle tier" iPhone, as it was for the 4S when it was playing second fiddle to the then-new iPhone 5 last year. If similar figures hold true for China, early and strong availability of the iPhone 5c may be hurting shipments of the model in the current quarter, though it seems clear he has also changed his opinion of the overall sales of the iPhone 5c since September, before it debuted.

The iPhone 5c, while not hugely advanced from the iPhone 5, remains a big step up from an iPhone 4 or 4S for upgraders, and offers some minor improvements, better integration with iOS 7, and is prized by younger, more trend-conscious demographics. A number of reviews -- including our own -- have mentioned that the device is far more impressive in person than in photographs.

In pictures, the colorful polycarbonate back of the iPhone 5c is the focal point, but makes the phone look more slippery, softer and cheaper than it does in real life. An interior steel frame (which doubles as an antenna) and precision manufacturing and polishing give the iPhone 5c a hefty and solid feel that communicates the quality of the build in the same way the iPhone 5 did last year.

Ming-Chi reiterated his calendar Q1 2014 estimate of iPhone sales overall at 38 million units, a quarterly drop (but normal for the post-holiday period) of 33 percent. Of that, 24.2 million would be the iPhone 5s, six million would come from sales of the iPhone 5c, and 7.8 million from older-model sales. While he has sometimes been more accurate than other analysts at predicting Apple behavior, he has also been wrong on occasion. The calendar Q4 predictions will either be verified or vilified when Apple releases its sales figures for the holiday season, likely to be announced some time in late January.
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Dec 20, 2013, 11:33 AM
Got to love speculation building on speculation with little real data on either sales or timing, or or or .
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Dec 20, 2013, 04:23 PM
If it was any other analyst, it might not have run as a story, but Ming-Chi Kuo has an above-average track record because he appears to have solid contacts in Apple's supply chain -- plus the reversal of his views on the iPhone 5c are interesting, though he doesn't really address why the dramatic shift in just two months.
Charles Martin
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