The budget iPhone might not be enough to help Apple in China

Apple iPhone 5C China Analysis

By now we all understand why Apple is building a budget version of its iPhone: So it can reach consumers in emerging markets who don’t have the money to spend on high-end smartphones. But Bloomberg Businessweek points out that a mid-range iPhone with quality specs might not be enough to help the company improve its presence in China, especially when it’s going up against phones with similar or better specs that come with insanely low price tags. To get a sense of the brutal competition Apple faces, consider the recently released Xiaomi Hongmi phone that is priced at $130 features a quad-core 1.5GHz processor, a 4.7-inch display with a pixel density of 312 pixels-per-inch, an 8-megapixel rear-facing camera and a 2,000 mAh battery.

“I believe the Hongmi is the best product among all 1,000-yuan smartphones,” Charles Custer, editor of Tech in Asia, tells Bloomberg Businessweek. “Low price point is already Xiaomi’s selling point and this [phone] is already cheaper; it will probably sell like hotcakes.”

And this has always been the big danger that Apple faces with its attempts to get into emerging markets: It may be picking a fight that it is simply not designed to win. If Chinese consumers find that Apple’s budget iPhone is still overpriced and has underwhelming specs compared to phones such as the Hongmi, does the company dare to lower its margins further by going even cheaper while keeping competitive specs? Either way, it looks as though Apple must maintain a very tough balance between maintaining market share and profitability.

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