Apple’s iPhone 5c Sales Story Is A Complex One

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For years, pundits and analysts have been suggesting that the only way for Apple to compete against cheap Android phones, especially in China and throughout Asia, was to produce a cheap iPhone. Well, Apple finally relented (sort of) when it released the cheapish iPhone 5c –only data suggests that the Chinese prefer the higher-end iPhone.

It’s worth noting, however, that the data doesn’t actually tell a clear story about the 5c, and it’s difficult to draw clear conclusions about how it’s doing worldwide, mostly because Apple hasn’t released a break-down of iPhone sales by type, which leaves us to speculate and look at a variety of analyses to figure it out.

The good news for Apple is that a recent study by Umeng found that 8 out of 10 high-end smartphones in China, defined as those costing $500 or more, were in fact iPhones of one sort or another, so Apple is controlling the high end of the Chinese market just as it has controlled the high end of the U.S. market.

According to comScore, for the period ending January, 2014, the latest figures available, Apple was at the top of the U.S. subscriber heap with a 41.6 percent market share.

We know the iPhone is selling well, but we are left to parse various sources to figure out how it breaks down.

According to the data from Umeng, iPhone 5c sales in China at least have been dismal. According to a chart posted on Andreessen Horowitz analyst Benedict Evan’s blog, iPhone 5c sales in China are in the 2 percent range compared to the 5s, which is at around 12 percent and the iPhone 5, which is around 15 percent. The odd part of this equation of course, is that the 5c is basically the 5 in a colorful plastic shell, but it’s that design that people appear to be rejecting.

It seems when people buy an iPhone, they want the full iPhone look and feel, and colored plastic is not what they are looking for in a smartphone. Part of the problem is that even though the phones have been highly discounted by carriers, at least here in the U.S., it’s not clear the discounts are driving sales. Consider that Walmart was offering the 5c for just $45 with a two-year contract last fall, and that was after Best Buy had dropped the price to $50 with a two-year contract.

Last week, Apple, in what would seem to be a tacit admission that sales weren’t going as well as they’d hoped, introduced an even cheaper version of the 5c with 8GB of storage for £429 in England without a discount. That’s $729 U.S. for what amounts to last year’s iPhone in a colorful plastic case with a small onboard hard drive. No wonder they aren’t flying off the shelves.

Benjamin Robbins, principal at Seattle-based mobile consulting firm Palador, told me that maybe the 5c is doing poorly across markets because people buy Apple for the prestige factor, and nobody really wants to get a cheaper one. He said this has always been true of Apple because cheap simply isn’t in its DNA, no matter what the pundits might suggest.

“Apple’s brand always has been exclusive in nature,” Robbins told me. “Apple’s marketing team excels at portraying an elite experience and lifestyle that one would have through ownership of their products. Apple can’t have it both ways. It can’t be the penultimate tech product to own and the low-budget leader at the same time. Just as Android struggles to do cool, Apple struggles to do cheap.”

If Robbins is right, and what he says makes sense in the context of the data, then offering an even lower-end 5c in overseas markets is probably going to produce the same bad results. If people didn’t want a 5c with 16GB of storage, it’s hard to figure how they are going to want a 5c with half the memory.

But is that the whole story? Do we simply go for the high end because that’s what we expect from Apple? Not so fast. A couple of stories put this theory into question. First, citing data from a variety of sources, AppleInsider reports that the iPhone 5c, for all its reported issues, actually outsold every other flagship smartphone out there last quarter with an estimated 12 million 5c’s sold to date. Compare that to 9 million Samsung Galaxy 4S’s, 8.2 million Nokia Windows smartphones and 2.3 million LG G2′s, according to data provided in the AppleInsider article.

And a Wall Street Journal story (registration required) says that the main 5c manufacturer in China, Pegatron, posted a 22 percent earnings jump — due in large part to its relationship with Apple.

All of that data tells a different story and suggest that perhaps the 5c is doing better than we thought – at least in terms of overall volume.

One thing is clear, though, Apple is not built for the low end of the market and it never has been. If it was looking for pure numbers, there are ways to build market share. Nokia is trying to do it by offering the highly competitive Nokia X line, which starts at €89 and tops out at €109 for the highest-end model. These phones, which were announced at Mobile World Congress last month, run a special version of Android, but instead of running Google services, they run Microsoft. The idea behind these phones would seem to be to build market share at the low end of the market to boost their overall numbers (and boost Microsoft service usage).

Microsoft, Nokia and BlackBerry all see the market share handwriting on the wall. They all know that if you can’t get to at least 10 percent share, it’s going to be hard to attract developers. So they try to get market share anyway they can, just to boost the numbers, but that’s simply not how Apple operates.

Apple was never going to go that low. Instead, it made an odd compromise and decided to go low-ish, an approach that appears to have produced mixed results. If Apple were looking for some additional sales, it might have gotten them. If it was looking to use this to increase sales in China, it doesn’t seem to have worked.