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News : Innovation Last Updated: Jan 17, 2013 - 7:03 AM

Apple's shares slide; iPhone 5 selling in China at up to ¥7,200
By Michael Hennigan, Finfacts founder and editor
Jan 16, 2013 - 9:02 AM

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Update: The Financial Times reports today that Apple is to enable Chinese consumers to buy its products on credit. It is an acknowledgement of the sales challenges in the Chinese market.
Customers in China buying any product that costs more than ¥300 renminbi ($48) from Apple’s online store may now apply to pay in up to 12 monthly installments interest-free, the company said on its Chinese website.
The service, which is offered to holders of China Merchants Bank credit cards, also extends payment in up to 24 installments. Payment in 18 installments carries a 6.5% interest rate, while for 24 installments an 8.5% interest rate will be charged. The offer applies to purchases of up to ¥30,000.

Apple's shares closed down 3.15% on Tuesday at $485.92, off 31% from its all-time high of $705.07 last September. Meanwhile, with Apple's world price which enabled it achieve a net income before tax ratio of 28.5% in 2011/12 ($18.5bn), its top of the range iPhone 5, at 64 GB, is for sale in Guangzhou, China at ¥7,200 renminbi (US$1,160).

I saw the iPhone 5 myself in Guangzhou last weekend and the minimum wage in Guangdong province is at  ¥1,300 per month. Besides, the Foxconn assembled iPhone in China ex-materials costs Apple in the range $7 to $8 per unit.

Tim Cook, Apple chief executive, on his second visit to China in a year, said last week, that he expects the country to overtake the United States as the technology giant's largest market.

Cook said Apple would launch new products in China, but refused to comment on reports the company is planning a cheaper iPhone for emerging markets like China, the official Xinhua News agency reported last week.

"China is currently our second largest market. I believe it will become our first. I believe strongly that it will," Cook told Xinhua in an interview.

Apple said it sold over 2m iPhone 5 handsets in China within three days of its launch on December 14 last year.

Tim Cook's background was in supply chain operations and he was responsible for moving Apple's manufacturing to China. Steve Jobs never visited the country.

Apple's target market isn't migrants on the minimum wage while young middle class couples are like their counterparts everywhere: struggling.

Samsung Electronics announced last Monday that global sales of its flagship Galaxy S smartphones had topped 100m since the first model was launched in 2010, cementing its dominant position over US rival Apple.

In Malaysia for example, Samsung's strategy of providing Galaxy handsets at a range of prices, is working.

The challenge for Apple is that it can still do well like Microsoft but consumer electronics needs a lot of free hype. 

Apple was reported by Japan's Nikkei news service on Monday to have halved its orders for LCD screens and other parts for the iPhone 5 this quarter due to weak demand.

According to Nikkei, Apple had originally ordered 65m iPhone screens for the 2013 January-to-March quarter from its suppliers which include Japan's Sharp and South Korea's LG Display.

Stuart Jeffrey, a Nomura analyst, has cut Apple's earnings forecasts for fiscal 2013 and 2014.

“If iPhone 5 sales really are disappointing so soon in the product’s refresh, then it seems fair to worry about likely sales volumes in the next few quarters before the iPhone is next refreshed,” Jeffrey said in note to clients, while lowering his price target to $530 from $660.

Last September, Nick Bilton in The New York Times said: "If Apple continues on its current trajectory, something remarkable might happen on April 9, 2015, at around 11 am.

That is, statisticians and investors I’ve spoken with say, a conservative estimate of when Apple could become the first company ever to be valued at $1 trillion. (Yes, you read that correctly: the number one, followed by 12 zeros.) Other analysts are making even more aggressive estimates for the company’s value, which, as of Friday, was $656bn. Those people put the trillion-dollar mark at less than a year from now: Aug. 16, 2013."

Apple's market capitalisation on Tuesday was $457bn -- still ahead of ExxonMobil as the world's most valuable public company.

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