China Mobile Ltd. (ADR) (CHL): Does This Mean Apple Inc. (AAPL) Doesn’t Need a Low-End Phone?

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Much has been made lately of the growth potential that the entry-level phone market represents. As the leader in the high-end smartphone arena, rumors surrounding Apple Inc. (NASDAQ:AAPL)‘s needs for a cheaper alternative to supplement its dominant share of the full-featured smartphone market are nothing new. I’ve suggested the same thing on more than one occasion. But a new report by research firm IDC detailing 2013 smartphone sales growth adds another wrinkle to the “iPhone Mini” debate.

China Mobile Ltd. (ADR) (NYSE:CHL)The data
For smartphone users, the notion of going back to a feature phone — you know, the “old days” — is borderline heresy. But for the majority of the billions of mobile-phone users around the world, old-school feature phones are the devices of choice. Either because unsubsidized smartphones cost too much for the majority of buyers, or because few emerging markets can boast the widespread, lightning-fast networks we’ve become accustomed to in the States, feature phones continue to dominate the global phone market — for now.

According to the IDC report, 2013 will be the year of the smartphone — the first year in which smartphones gain a slim 50.1% majority of the global mobile market. For Apple Inc. (NASDAQ:AAPL), and its brethren in the smartphone marketplace, that’s encouraging data, to say the least.

Much of Apple Inc. (NASDAQ:AAPL)’s nearly 20% drop in share price year to date has been attributed to concerns about continued growth, particularly overseas, where Apple Inc. (NASDAQ:AAPL) allegedly has nothing to offer customers but its expensive, high-end iPhones. Added competition, compressed margins, and uncertainties about developing the “next great thing” have also taken their toll on Apple Inc. (NASDAQ:AAPL)’s valuation. As for the low-end phone market, there’s no doubt it offers tremendous upside — a threefold increase in sales by 2016, according to research firm IHS.

As for the smartphone market in 2013, the IDC report confirms what many of us have long thought: China and India offer the most upside for mobile-phone manufacturers, including those in the surging high-end smartphone market.

Does this change the game for Apple?
It’s no accident that Apple Inc. (NASDAQ:AAPL) CEO Tim Cook has spent so much time in China of late. Cook recognizes that global growth isn’t just a good idea for Apple Inc. (NASDAQ:AAPL) — it’s a necessity. And as the IDC report confirms, China will remain a key market for all phone manufacturers for years to come. Cook’s conversations with China Mobile Ltd. (ADR) (NYSE:CHL) are probably an effort to secure a deal like the one Nokia Corporation (ADR) (NYSE:NOK) has: Offer China Mobile’s 700 million customers the latest, greatest smartphone — in Nokia’s case, the Lumia 920T — and subsidize the cost so that it’s virtually free with a service contract.

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