Nikhil Kumar: At last, Apple could be ready to start doing business the Chinese way

Apple’s share of the smartphone market in China is less than 5 per cent

The rumours have been circulating for months. But now it seems as if Apple will indeed release a cheaper version of the iPhone next month. Last weekend, the technology website All Things D alerted Apple-watchers to the possibility of a 10 September launch. It didn’t take long for images supposedly showing the new phone to pop up on various blogs and websites.

While we will have to wait to judge the veracity of the assorted “leaks”, it is worth considering whether it would make sense for Apple to release a cut-price iPhone. Already, questions have been raised about the company abandoning its long-standing practice of focusing on new, cutting-edge products, not engaging in price wars to drive up market share.

After all, under the late Steve Jobs, the company demonstrated a laser-sharp focus on new products, devoting its energies to finding new ways to keep ahead of the competition. The story is well known: a new line of Apple Macs that turned the beige-box aesthetic on its head; a music player that defined a new market. And so on.

Apple never discounted to push its existing products, nor did it release cheaper versions of its existing lines. Instead, it came up with new, groundbreaking gizmos that allowed it to continue commanding premiums from eager customers. But under Mr Jobs’s successor, Tim Cook, it hasn’t been quite as good at coming up with innovative gadgets. Ideas have been mooted – an iWatch, an iTV – but nothing has materialised (not yet, anyway). At the same time, competitors such as South Korea’s Samsung and Taiwan’s HTC are catching up.

This is where the cheaper iPhone could act as a sticking plaster, easing investors’ concerns by driving up sales in a key market and giving Apple some breathing space to come up with a whizzy new gadget.

The market in question is China, where Apple has been a laggard when it comes to smartphones. The US firm’s share of the Chinese smartphone market is less than 5 per cent, according to the data firm Canalys. Samsung’s share, on the other hand, is in double digits. One reason for Apple’s lack of success is its failure to come to an agreement with China Mobile, the largest mobile phone network in the country (it claims to have both the world’s largest mobile network and customer base). Apple iPhones are not available to its 740 million customers (or to be more precise, its 137 million or so 3G customers) because they would not work on the China Mobile network without a redesign. According to reports, China Mobile has also been reluctant to make the kind of marketing commitments that Apple demands of its partners.

This is where a cheaper iPhone fits in. China is moving in the direction of granting licences for 4G networks – the powerful State Council recently issued guidelines to speed up the process, according to local media – and China Mobile will, naturally, be a big player in the new market. The rumoured cut-price iPhone, meanwhile, will reportedly be based on Qualcomm chips that – you guessed it – will work on Chinese networks. Moreover, a cheaper iPhone makes sense in China, where growth has been driven by low and mid-priced handsets.

The result: Apple and China Mobile might finally be on the cusp of striking a deal that would have the potential of transforming the tech giant’s sales in China. Mr Cook was seen travelling to Beijing a couple of weeks ago to  meet China Mobile’s chairman, Xi Guohua. There will no doubt be negotiations about the marketing commitments – but if the cheaper version of the iPhone works in China from the get-go, Apple won’t have to go back and redesign its phone, and therefore might be in a better position to make concessions.

Sales growth in China would help to ease the pressure on Mr Cook and his team as they work on the next big product (a cheaper iPhone would also find favour in other emerging markets such as India), satisfying hungry Wall Street investors as the iWatch or iTV or i-whatever-it-is is conceived and tested and readied for launch.

Streaming deal could be bad news for cable

Reports earlier this week of a preliminary deal between Viacom and Sony that would allow the Japanese electronics giant to stream the media group’s channels over its planned online TV service might, in time, prove to be a marker that signals the beginning of the end of cable television as we know it today.

According to The Wall Street Journal, the agreement, if firmed up, would give Sony the rights to stream MTV, Comedy Central, whose hit shows include South Park, pictured left, and other Viacom content over the service which is initially  expected to be available on its video games consoles and television sets.

While other companies, including Intel, are working on similar projects, none appears to have secured such an agreement. The cable business in the US will not change immediately. But in due course deals such as this – where major content providers agree to distribute not just individual sitcoms and films, but stream channels to customers’ TVs over the internet – have the potential to trigger an industry-wide shake-up.

After all, if consumers have a wide-enough choice online, with channels that can be accessed via their television and a broadband connection fast enough to support high-quality streaming, why would they want to sign up with a cable provider?

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