Apple's new iPhone 5C struggles to satisfy in China, but bright spots remain

Before Apple announced its lower cost iPhone 5C, some had speculated the C could stand for China, a vital market for the company’s future growth. But on Wednesday, consumers in the country appeared less than thrilled with the new smartphone amid expectations it would be far more affordable than the standard iPhone.

“Its much more expensive than what the previous information suggested, a big difference from what I thought,” said 27-year-old Wang Qian, who was disappointed by the phone’s lack of innovation. “All they’ve mainly done is provided more colors and raised the phone’s performance.”

Its caused some to question whether Apple needs to be more aggressive in China at a time when its rivals are fiercely competing in the market with their own affordable handsets.

The iPhone 5C will start at 4488 yuan ($728) in China when bought without a contract, making it only 800 yuan cheaper than its cousin, the iPhone 5S. The high price point surprised many, especially as it was almost double what some analysts had estimated the much-rumored handset could end up costing buyers.

Apple clearly wants to reach out to more customers, who are demanding a cheaper iPhone, said Teck Zhung Wong, an analyst with research firm IDC. But on Tuesday, Apple decided to only respond with a half measure in the form of a still pricey iPhone 5C, perhaps as a way to preserve the company’s high profit margins and brand equity, he added.

“I think Apple could have landed a strong punch if they had priced it at $350 to $450, but they decided to hold back,” Wong said. “It seems to me like a lost opportunity.”

In China, Apple is already losing market share, with competitors including Samsung Electronics, Lenovo and Huawei Technologies selling a full range of Android handsets including lower-end models. Some of the nation’s best-selling smartphones are much cheaper than the iPhone 5C, and can go for $80 to $150.

“The true cheap phone is going to be the iPhone 4S,” Wong said. The new 8GB version of the iPhone 4S is priced at 3288 yuan in China.

The new lower-cost iPhone 5 will still draw its share of customers in China, who want an Apple device, and like the phone’s different colors, Wong said. But some Chinese consumers will probably buy the marginally more expensive iPhone 5S instead, or look at Android alternatives, he added.

“I think it [the iPhone 5C] will give Apple’s shipments a little bump, but not as much as previously expected,” Wong said. “I’m not too impressed with the 5C to be honest.”

The iPhone 5C’s price, however, is not necessarily set in stone, and Apple could end up cutting its price in the future, according to analysts. In addition, the country’s mobile operators are expected to help pad consumers’ costs for the phone with carrier subsidies. So far, Apple partners China Unicom and China Telecom have yet to announce subscription plans for the phone.

The high expectations surrounding Tuesday’s iPhone announcement may have led to some disappointment among consumers in China. But the company is clearly playing to its strengths, and focused on sales in China’s high-end market, rather than growing market share, said Nicole Peng, an analyst with research firm Canalys.

“If Apple really wants to make a difference in China and make a big impact, they will need to take bigger risks, and move faster,” she said, pointing to its main rival Samsung. The company currently reigns as China’s largest smartphone vendor, and has been quick to slash prices and localize products in order to boost sales.

But one major bright spot for Apple is that its finally bringing its iPhones to China on the same day they launch in the U.S. In previous product releases, Apple’s Chinese customers have been forced to wait weeks to months before the devices officially went on sale in the country, potentially disrupting demand.

Apple may also be close to striking a deal with China Mobile to offers its iPhone on the carrier’s network, after years of negotiations. Late last month, Chinese regulators approved four iPhone devices that are compatible with the carrier’s 3G and upcoming 4G networks.

The two companies have yet to comment on a imminent deal. But a partnership would finally give Apple better access to China Mobile’s 740 million customers with an iPhone that can use the carrier’s high-speed networks.

While Apple’s iPhone 5C might have its critics, some like 20-year-old Deng Jiarui believe consumers in China will still buy the device.

Deng himself was dissatisfied with the device’s high price, but said, “People will still buy it, because Apple iPhone users all know that the iOS system has a much smoother user experience than Android.”

In the U.S. Apple’s iPhone 5C starts at $549 when bought without a contract. Apple has said its products are typically are priced in higher in China due to currency valuation and government taxes.