Capping a week during which Apple was reported to have cut iPhone 5 component orders in half, is a report that Apple has a new plan for attracting more customers in China—the world's largest smartphone market but one in which Apple is losing shares to competitors with lower-priced devices.
Apple plans to offer consumers in China financing plans with interest rates between 0 and 8.5 percent, depending on the installment plan, Cnet Asia reported Jan. 17, citing rumors.
The payment plans could meet a variety of needs, offered for purchase amounts between roughly $50 and $5,000, said the report. "But there's a small catch," it added.
"In order to qualify, customers must purchase online through the Apple Store. In addition, customers must register and charge their Apple product to a China Merchants Bank Co. credit card."
"Financing" and the "iPhone" were two words recently also combined by T-Mobile, which has said it plans to offer the iPhone this year, but in a way unlike its rivals have done. Instead of subsidizing the iPhone at great cost to itself and tying subscribers into two-year contracts, T-Mobile has said it plans to offer interest-free financing plans that enable users to make small monthly payments, make only a small up-front investment and have the option to upgrade their devices whenever they'd like.
Apple is shrewd enough to realize that if this is the way the trends are moving, it might as well offer the financing itself and receive a cut.
Is this a deal it has hatched with China Mobile?
Apple CEO Tim Cook this month met with China Mobile Chairman Xi Guohua at the carrier's Beijing headquarters. China Mobile is China's largest carrier, with more than 700 million subscribers, but it doesn't yet offer the iPhone—which likely contributed to Apple's market share in China falling from fifth to sixth place during the third quarter of 2012.
The two companies have been negotiating for several years. "The key is whether Apple and China Mobile can agree on the commercial terms, including shipment commitment and handset subsidy," Elinor Leung, an analyst with CLSA, told The Wall Street Journal.
China Mobile understands well its power position. Was part of the deal the companies struck that China Mobile wouldn't subsidize the smartphones itself and would agree to let Apple arrange the financing? Time will tell.
The Cnet report adds only that the "financing plan is a shrewd bit of business."
China is currently Apple's second-largest market, but during his China visit, Cook said he "believes strongly" that it will become its first.
Cook called China a "very, very important country" for Apple, noting that much of its manufacturing is performed there, that it's building more retail stores there and it has "incredible partners" in China.
"There are no Apple products that you would look at and say they are not for China. I think they are all perfect for China," Cook added, according to a report from the Xinhua News Agency. "I strongly believe that people from all cultures and countries want the best product, and that's what we are trying to do."