In world's biggest market, 'cheap' iPhone looks too pricey

The world's biggest public company and the world's biggest country are at loggerheads over the price of a phone.

Apple Inc's new plastic-backed iPhone 5c will sell for 4,488 yuan China, almost $200 more than the United States retail price of $549 and only 800 yuan less than its top-of-the-line sibling, the iPhone 5s.

(Also see: Apple unveils iPhone 5c and iPhone 5s)

The pricing of what was expected to be a cheap model aimed at growth markets such as China and India has not only stumped investors, but also Apple aficionados in China, a country of 1.4 billion people and the world's largest smartphone market.

(Also see: 10 new features in Apple's iPhone 5s)

"My original estimate of the 5s price was around 3,000 yuan, but more than 4,000 - I think for a budget version the price may be a little expensive. I don't think I can buy one," said Liu Donghai, a 25-year-old chemical engineer.

"If the 5s is around 5,000, then it's similar to the already-released 5 and 4S. I would accept this," he added.

Apple, whose market capitalisation of $449 billion makes it the world's most valuable publicly traded company, unveiled the two new handsets at an event at the company's headquarters in Cupertino, California, on Tuesday.

For the first time, it held a launch event in Beijing hours later on Wednesday, a move seen as underscoring the importance of the Chinese market.

Lack of buzz
New Apple product releases tend to generate a great deal of buzz, but the 5c's reception in China, where fans have been known to queue for days for new products, was lukewarm at best.

"The iPhone 5c is so expensive. Originally I absolutely planned to buy it, now the price makes me uncomfortable. Isn't it just an iPhone 5 with a plastic back?" said Sina Weibo user Shangzhiruixin.

(Also see: iPhone 5c price disappointment: 'Low-cost iPhone' fails to check-in)

The phrase "iPhone 5s" was the most popular search term on Sina Weibo, China's most widely used microblogging service, on Wednesday, while "iPhone 5c" did not appear on the top searches list.

Other users questioned why anyone willing to fork out well over 4,000 yuan for a smartphone would not just pay a bit more for the premium 5s model.

(Also see: Apple says iOS 7 will be available September 18)

But others believe that the 5c makes sense in an increasingly competitive smartphone market, where the cheaper the handsets the more bitter the fight for dominance.

Apple's share of the China smartphone market slipped to 5 percent in the second quarter, according to research firm Canalys, trailing not just Samsung but also the likes of Lenovo Group Ltd, ZTE Corp, Huawei Technologies and Xiaomi Technology.

(Also see: 10 big improvements in Apple's iOS 7)

"Even though Apple has a lower end iPhone now, its price is still considered mid-end in China and not low-end," said Sandy Shen, a Shanghai-based analyst for Gartner.

Around half of China's smartphone shipments are in the 700-1,500 yuan range, said Shen, but competing on those prices isn't an attractive prospect for Apple.

"Considering Apple's old rival Samsung and domestic players such as Huawei, Lenovo and Coolpad all have phones in that category, Apple will still lose out in market share in these key segments," she said.

© Thomson Reuters 2013

iPhone 5c and iPhone 5s launch in pictures