The world's largest carrier, China Mobile, has never carried the Apple iPhone because of the mobile operator's proprietary 3G network. But Huberty sees Apple able to work out a deal to sell the Apple iPhone mini for China Mobile's TD-SCDMA network and that would add another 20% of the Chinese smartphone market to the 10% that the Apple iPhone 5 already owns.
$330 would allow Apple to be competitive with Chinese upstarts like ZTE, Huawei, Lenovo and Coolpad. Even assuming low 40% gross margins and a 1/3 iPhone cannibalization rate, an Apple iPhone mini makes money for Apple. For example, if the iPad mini were to launch in China this year, Apple's gross profit margin would drop 2 percentage points to 49%, but the additional volume would raise gross profits by an additional $2.4 billion.
What would be required to get this going would be the launch of a lower priced Apple iPhone mini, passing legislation to allow mobile numbers to be ported over between carriers in China, and a deal between China Mobile and Apple that allows the iPhone to be used on the operator's proprietary network. Both Apple and China Mobile have tried since 2009 to work out a deal, with the last such meeting taking place last month when Tim Cook visited the CEO of the carrier.
Long time Apple executives are not used to cutting prices and making up the difference on volume. But a low priced iPhone could take Apple in a new direction and not just in China. If Apple sees that it is able to make up for the lower profit margin by selling more product, it could be one of those light bulb turned on moments that could give Apple a second wind and make it a dangerous competitor once again.