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Prices of latest iPhones putting off smartphone shoppers in China

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BEIJING — If Nicole Zhou reflects how the Chinese feel about Apple Inc.'s latest iPhones, the technology giant may have a huge struggle on its hands winning consumers over in the world's biggest smartphone market.

One day after the Cupertino, Calif., company unveiled two new iPhone models — the 5s, with an upgraded processor and fingerprint security system, and the slightly cheaper 5c, with a colorful plastic back — 30-year-old Zhou, an employee at a state-owned enterprise, bought herself a Samsung Galaxy S4 instead.

"I had no idea the 5c was going to cost 5,000 yuan [about $817]," said Zhou, who paid about $650 for the Samsung phone. "I don't see any really big difference between that one and the other new iPhone."

Carriers in China and in other countries don't subsidize the cost of phones as they do in the U.S. As such, Apple's iPhones have been too costly for average users and the company has been losing market share to rivals such as Samsung Electronics Co., with its Android-based phones, and local competitors.

Still, millions of Apple fanatics live in China, and many anticipated this week's product release with the same zeal as their U.S. counterparts.

But for many, the launch brought a series of disappointments. First, the release event in China — Apple's first media event in the country — turned out to be only a screening of the prior night's Silicon Valley unveiling. And then, according to online posts and interviews, Apple failed to impress.

"The prices are too high," said Nuo Long, manager of Wanxiang, a Shenzhen company that manufactures and sells knockoff iPhone handsets. "Also, there aren't many new innovative features. So I don't think the 5c or the 5s will sell as well as the 4s or 4."

Nuo, a self-professed Apple fanatic, said he is considering buying an iPhone 5s — it's only slightly more expensive than the 5c, he said, and owning the latest model would make him feel ahead of the curve. Yet he's still not entirely sold.

"I think after [Steve] Jobs died, [current Apple CEO Tim] Cook hasn't done much in the way of innovating new products," he said.

Many China tech analysts predicted that the iPhone 5c would cost 3,000 yuan ($490), giving it an edge over low-cost competitors that over the last few years have slowly eroded Apple's market share. Yet Wednesday, the company announced that a 5c with 16GB of memory would cost 4,488 yuan ($733), about as much as an average monthly salary of a Beijing worker. The most basic model of the 5s will sell for 5,288 yuan, or $864.

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

The product release was a trending topic on China's most popular microblogging service, Sina Weibo. One user compared the 5c's colorful plastic backing to a potato peeler. Another said the "c" probably stood for "costly;" a third guessed that the "s" in 5s meant "super-expensive."

Others were bemused by Apple's decision to take the iPhone 5 off shelves while the iPhone 4 and 4s remain on sale. "The saddest thing in the world is when an old person must attend her child's funeral," wrote user JustBreathless.

Chen Xin, a 23-year-old human resources employee at a five-star hotel in Beijing, said that for many of her co-workers, Apple's prestige is worth the price.

"The most important thing is the brand," Chen said. "The phones could be even more expensive, and people would still buy them."

Yet Chen hasn't bought into the hype — last year, she swapped her aging iPhone 4s for a Samsung and does not plan to switch back. "I'm not as rich as my friends," she said.

Kaiman is a special correspondent.

Copyright © 2014, Los Angeles Times
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