iPhone Sales Buzz; EU, China Near Telecoms Deal
Several significant telecoms stories are buzzing through the headlines as China returns to work after a long holiday, led by news that iPhone sales have gotten off to a roaring start after initially hitting a regulatory roadblock in the world’s largest mobile market. Also of interest is word that China and the European Union are close to settling a long-running dispute that could give European networking equipment makers better access to the lucrative Chinese market. And finally there’s a bit of regulatory news that looks like a positive sign, showing China is trying to cut its vast bureaucracy to provide easier market access for makers of telecoms products.
Beijing’s infamous red tape was the main factor behind the delay of the iPhone 6 launch in China, which became an embarrassment not only for Apple (Nasdaq: AAPL) but also for the famously slow moving telecoms regulator, the Ministry of Industry and Information Technology (MIIT). The delay that will force Chinese to wait 3-4 weeks longer than the rest of the world for the new iPhones was caused by excessive oversight from the MIIT, which must approve every cellphone model before it can be sold in China.
Such excessive oversight is rare in western markets, and often adds weeks to the launch schedules for cellphones in China. Despite that delay, media are reporting the new iPhone 6 has gotten off to a smashing start in China, notching more than 1 million orders in the first 6 hours after the nation’s 3 carriers began taking such orders. (Chinese article) Apple itself will start taking orders on October 10, and the iPhones will formally become available on October 17.
The latest reports repeat an earlier headline that said the new iPhones will carry a starting price of 5,288 yuan ($860), and that 6.5 million units will initially be available. The strong initial reception shows that despite negative publicity, Apple’s name still commands strong customer loyalty, even as leading rival Samsung (Seoul: 005930) starts to lose some of its luster. Accordingly, I expect we could see fairly strong sales when the newest iPhone finally does make its official landing in Chinese stores.
The next news bit contains word that China and the EU are on the cusp of a deal that would end a trade dispute that has rankled both sides for much of the last 2 years. That dispute has seen the EU accuse Beijing of unfairly supporting its leading networking equipment makers Huawei and ZTE (HKEx: 763; Shenzhen: 000063), which have taken big European market share in the last decade from local rivals including Ericsson (Stockholm: ERICb) and Alcatel-Lucent (Paris: ALUA).
The reports say the deal would see China limit export credits to its telecoms equipment manufacturers, and that the 2 sides are hoping to reach an agreement by the end of this month. (English article) This particular issue has been a sore point for quite a while, leading to steady stream of protectionist threats that don’t benefit anyone. Accordingly, an agreement of this type — which would come directly from Beijing rather than the manufacturers — looks like a good move that should calm tensions.
Finally there’s the regulatory move by the MIIT, which is reportedly making it easier for more companies to get into the business of telecoms equipment testing. (Chinese article) Right now only 10 firms can conduct such testing, and all needed approval from the MIIT.
Under the changes, MIIT approval will no longer be required and many more companies should be allowed into the space. It’s not completely clear what the final result of this change will be, but it does appear to be aimed at expediting the cumbersome and lengthy approval process for all telecoms products under the current system. If a larger number of firms are allowed to conduct such testing, it should theoretically help companies like Apple get their products to market more quickly in the future.
Bottom line: The iPhone 6 looks set for a strong launch in China, while a new agreement between Beijing and the EU could ease trade tensions and benefit networking equipment makers in both markets.
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