Why Apple's New iPhone 5c Was a (Temporary?) Disappointment for Some Eager Chinese Smartphone Buyers

Despite rumors that Apple might launch a new low-cost phone for China - that did not happen on September 10th, 2013.

Yes... Apple's new iPhone 5c is a less expensive option than the 5s that also launched (amidst perhaps-not-as-overwrought-as-usual hoopla in Cupertino and online). But the iPhone 5c - priced at $US 549 without a carrier contract - is not the easy-to-own Apple smartphone China-watchers had been waiting for. At $US 549, the iPhone 5c is still way out-of-reach for the average Chinese consumer.  

So, are there any signs of hope for a mass market phone from Apple designed expressly for the Chinese mainland? 

Well...

Apple's newest iPhones - the 5c and 5s - are both targeted at the video-friendly next-generation 4G wireless technology known as Long-Term Evolution (LTE). 

And, yes, China's biggest mobile provider, China Mobile, is in the early stages of rolling out 4G LTE TDD (Long-Term Evolution Time Division Duplex) technology. At the current rate, it's likely that China Mobile will have their spanking-new LTE network running in many of the largest Chinese population centers by mid 2014.

But the wireless system currently offered by China Mobile to most of its subscribers - TD-SCDMA - is a protocol that Apple has never supported.

As Kevin Wang (director of China electronics research at IHS iSuppli) explained back in a 2012: “Among all the international smartphone brands competing in China, Apple is the only one not offering a product that complies with [China Mobile's] TD-SCDMA air standard." 

Why should fitting in with the (inferior) TD-SCDMA system currently offered by China Mobile matter to a forward-looking company like Apple?  

It's all about the numbers.

China is the world's largest smartphone market. And China Mobile, still offering mostly only TD-SCDMA, is the dominant player with something like 740 million subscribers. 

That's right. China Mobile has roughly seven times the number of subscribers Verizon Wireless currently has in the U.S. 

So... why hasn't Apple just bitten the bullet and offered a cheaper phone that works on China Mobile's TD-SCDMA system?

A big part of the problem has been that Apple and China Mobile have not been able to find a way to work together (i.e., cellphone makers like Apple typically have been paid for their phones by service providers, who then offer the phones at a discount to users subsidizing the cost of the phone out of long term contracts, and China Mobile has reportedly been reluctant to meet Apple's subsidy expectations).

But that may be changing.

There are rumors of productive talks between Apple and China Mobile and the iPhone 5c may contain one tantalizing hint about how Apple is now thinking about the Chinese market: 

In a video that accompanied the release of the new phones, Apple's Craig Federighi (leader of iOS software engineering, speaking at around 3:15 in the video above) noted that the new case on the iPhone 5C will more easily accommodate the number of different bands necessary to access LTE networks all around the world. In other words, it will be possible to cram enough technology inside the new plastic 5c case to enable the next generation of iPhones (perhaps one made especially for China with a chip and bands to accommodates both the TD-SCDMA and the 4G LTE TDD standards favored by China Mobile?). 

Forbes and other business publications are already reporting (speculating?) that Apple is set to announce a landmark deal with China Mobile.

Still, based on what was announced in Cupertino on September 10th, 2013, it looks as if we'll have to wait at least a bit longer to see Apple's share of the smartphone market in China improve significantly (as of June 2013, Apple smartphones ranked 7th in China with just 5% of the market - which in absolute terms may be a lot of phones - but is nowhere near the 40%+ of the smartphone market that Apple has in the US).