Why it’s about to get tougher for Apple to grow iPhone sales in China

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Like other handset makers, Apple has continuously said how important China is for its phone sales. Apple may have to rethink its handset strategy however, as the world’s largest carrier, China Mobile, is reducing the amount it spends to subsidize hardware by $2 billion this year. Bloomberg reported the news on Friday, noting that as of June, the carrier had a whopping 790.6 million subscribers.

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Hardware subsidies paid by carriers help offset the high price of smartphones so by reducing this spend, lower-costing full price phones could be more attractive financially to a bigger group of consumers. China Mobile customers therefore could gravitate towards cheaper Android phones instead of Apple’s handset. Huawei, ZTE, Lenovo and Xiomi are all likely to benefit from this situation, as might Samsung to a degree since it does have low- to mid-priced phones on the market.

China Mobile made the decision to reduce subsidies because China’s Assets Supervision and Administration Commission told the three major Chinese carriers that they are overspending on such costs, as well as on advertising, says Bloomberg. It’s entirely possible that with higher phone prices, China Mobile could lose customers to its main rivals, China Unicom and China Telecom. But neither has the subscriber base nor the network infrastructure of the world’s largest carrier.

China Mobile still plans to spend more than $3.4 billion in phone subsidies this year, so it’s not eliminating them entirely. However, the cut is a 38 percent reduction, which could affect iPhone sales in the country, depending on how the carrier employs the remaining subsidy pool.

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