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Morgan Stanley (MS), China Mobile Ltd. (ADR) (CHL): Here’s How Apple Inc. (AAPL) Wins in China

One of the negative aspects of Apple Inc. (NASDAQ:AAPL)‘s most recent quarterly results was an unexpectedly large slowdown in China. This was particularly concerning because at $4.9 billion in revenue during the third quarter, Apple’s Greater China business accounts for about 14% of its total sales — and Apple needs this number to grow substantially in the years ahead if it’s to muster any type of significant revenue growth from this point forward. Instead, Apple Inc. (NASDAQ:AAPL)’s Greater China operating segment revenue declined by 14% in the third quarter on a year-over-year basis and 43% when compared to the second quarter of 2013.

Apple Inc. (AAPL)

Also of concern to Apple Inc. (NASDAQ:AAPL) investors is the rapid rise in market share for Google‘s Android operating system, which has taken a commanding lead in China and other global markets. In fact, some estimates peg Google’s share of the Chinese smartphone market at more than 70%.

However, recently published research from Morgan Stanley (NYSE:MS) suggests that Apple Inc. (NASDAQ:AAPL)’s prospects in China are about to receive a substantial boost from the rumored launch of a lower-priced iPhone “5C” on September 10.

Morgan Stanley (NYSE:MS) surveyed 2,000 Chinese mobile phone users and found that 23% of potential smartphone buyers intended to purchase the iPhone 5S, which was slightly above the 19% of phone owners that chose the iPhone in Morgan Stanley’s previous survey in January 2013. However, that number jumped to 36% if Apple Inc. (NASDAQ:AAPL) were to launch a lower-priced iPhone.

As for how low the iPhone 5C would have to be priced, the survey found that Chinese consumers consider US$486 (or RMB 4,000) to be an acceptable price range. That’s a very positive sign for Apple, because it’s widely expected to price the iPhone 5C at $399 or less.

Also interesting to note is that Morgan Stanley (NYSE:MS)’s survey found that Apple could receive an additional 6% boost in market share if it were to reach a deal with China Mobile Ltd. (ADR) (NYSE:CHL) to bring the iPhone to its massive network of subscribers. With recent reports of talks between Apple CEO Tim Cook and China Mobile Ltd. (ADR) (NYSE:CHL)’s management, the two companies may be making progress on this front.

The article Here’s How Apple Wins in China originally appeared on Fool.com and is written by Joe Tenebruso.

Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on the Motley Fool Stock Advisor and Supernova premium service teams. You can connect with him on Twitter @Tier1Investor. Joe has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google. It also owns shares of China Mobile.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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