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Apple Tablet, zero impact on emerging markets?

January 28, 2010 • Features

Julien Blin, Principal Analyst & CEO at JBB Research, USA, tells why the new Apple Tablet or iPad will not really gain momentum in the developing markets across the globe.

Today, Apple announced its highly anticipated tablet PC: the iPad. While Apple’s tablet PC is set to gain good traction in developed markets such as North America, Western Europe, and Japan, it likely to have almost zero impact on emerging markets like South America, Africa and even parts of Asia like China.

1. Apple Tablet PC set to gain good traction in developed markets such as North America, Western Europe, and Japan. The iPad is set to experience strong adoption in developed markets such as North America, Western Europe and Japan based on Apple’s strong brand, the growing popularity of its exciting products (e.g. iPod, iTouch, iPhone, etc.), Apple’s current momentum, and customers’ high level of income in those regions.

2. But set to have zero impact on emerging markets like South America, Africa, and even parts of Asia like China due to IP and content issues. I don’t expect the iPad to have an impact on emerging markets, like Africa South America, Africa, and even parts of Asia like China, for several reasons: content issues, IP (intellectual property) issues, and large proportion of low income customers.

Today, many people download content from iTunes, and shift this content file into a shareable MP3 player. Here in the U.S., this is against the law to share content that way, but the reality is that many people do it knowing that they could be fined heavily. But in an emerging markets like Africa for instance, it is hard to enforce this type of law.

So for instance, if the content carried through the iPad gets into a country like Nigeria, it would be hard for the content industry to enforce such a law and penalize the end user. Plus, how would it be possible to force consumers to pay if there is no law in the first place, but most importantly no robust payment systems? Clearly, it is impossible. With that in mind, it would not be a surprise if some content players would try to go whatever it takes to avoid a wide distribution of Apple’s iPad.

3. Lack of WiFi/3G support and adoption in emerging markets set to be another issue. Additionally, the lack of WiFi/3G support and adoption in emerging markets (e.g. Africa) remains fairly low compared to developed markets, which is another key obstacle for Apple.

For instance, in a country like China, where Apple has high expectations, 3G adoption remains pretty low, at <2% (10 million 3G customers at the end of 2009), according to the Ministry of Industry and Information Technology (MIIT), due to the large proportion of low-income consumers in China, who cannot afford the price of 3G handsets and services. Additionally, I would also point out that Apple products tend to have a 16% tax on them, which is another key hurdle for higher adoption of Apple products in China. The iPad is unlikely to be the exception to the rule here. 4. Pricing and large proportion of low income customers set to be other key issues. The iPad is set to be available for as low as $499 in the case of WiFi-only 16GB model, and up to $829 for the full version (WiFi/3G – 64 GB model). Although $499 is a fairly low price when it comes to a tablet PC, it will remain out of reach for many customers in emerging markets like Africa, South America and China due to the large proportion of low income customers in those regions.

As a reminder, the iPhone has been available in China anywhere between $730 to $1.024, which is too expensive for the large majority of Chinese. Of note, $800 is the average salary of most Chinese. As a result, many Chinese customers have been buying the iPhone on China’s gray market in Hong Kong for a more affordable price and with WiFi capabilities.

Due to hefty price associated with the iPhone and the lack of WiFi support (e.g. At launch, the iPhone 3G S sold through China Unicom did not support WiFi as WiFi was temporarily banned by the Chinese government in favor of an home ground competing system), iPhones sales in China have been a disappointment as China Unicom only sold 300k iPhone by the end of 2009. I expect to see to see knockoffs popping up everywhere in China.

While Apple is set to experience strong success in developed markets such as North America, Western Europe, and Japan, it is likely to have almost zero impact on emerging markets like South America, Africa, and even parts of Asia like China. Content issues, IP (intellectual property) issues, lack of 3G/WiFi support, and pricing issues due to the large proportion of low income customers, are set to remain key hurdles for Apple in this region to drive the adoption of its new flagship product.

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One Response to Apple Tablet, zero impact on emerging markets?

  1. What’s your take on the Apple Tablet?

    I tell ya, I was disappointed this thing could have been awesome instead Apple settled for a cheap device.

    Apple iPad Tablet

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