Paul Carsten on how Apple and China Mobile could cause a ‘costly subsidy war.’
The long-awaited deal could trigger a limited turnaround for Apple, whose fortunes have wavered in China in the face of stiff competition from market-leader Samsung Electronics Co Ltd and up-and-coming local rival Xiaomi Tech.
The reality is that Apple is selling more iPhones in China than ever.
Tech advisor Michael Clendenin:
I don’t see a price war coming where Apple is engaged in the war, but I do think you’re going to see a subsidy war coming… China Mobile, if they’re not making their targets on sales for these phones, they’re going to increase the subsidies… It’s like airlines: the other guys will fall like dominoes, so China Unicom will do it and China Telecom will do it.
The problem with that thinking is that there are no smartphone subsidies to spur sales. It’s a loan, not a subsidy. A loan which must be paid back over the length of the contract. No subsidy takes place. Carriers make a profit on the loan.
Think of it as an incentive to the customer which lowers the barrier to entry. Apple, the carrier, the customer. Win, win, win.