Despite Delay, Sales of iPad 3 to Surge in China

Friday, 20 Jul 2012 | 7:04 AM ET

Apple's latest iPad offering finally hit China's store shelves on Friday, months after its worldwide launch in March, but the delay is unlikely to dampen sales because of the Chinese passion for all things Apple, analysts say.

The new iPad is displayed during an Apple product launch event at Yerba Buena Center for the Arts on March 7, 2012 in San Francisco, Ca.
Getty Images
The new iPad is displayed during an Apple product launch event at Yerba Buena Center for the Arts on March 7, 2012 in San Francisco, Ca.

"Sales are going to be very strong. Everybody in China loves Apple products," Shaun Rein, Managing Director at Shanghai-based China Market Research Group told CNBC. "You've seen they've grown about 600 percent in the last two years in terms of sales."

The company's gadgets are regarded as prestige items in China, which Rein says goes a long way for a population that places a huge emphasis on social status.

"I interviewed a girl recently, who is 26-year-old. She makes $250 a month selling clothes and she had a $1000 iPad," Rein said. "I asked her how she bought it and she said she skipped lunch for six months."

The Chinese consumer's love for the popular tablet comes even as iPad's been the subject of controversy in the country. iPad 3's rollout comes weeks after Apple'ssettlement with local tech firm Proview Technology, which claimed it owned the iPad trademark in China. The dispute sparked a ban of iPad sales in several Chinese cities earlier this year.

Apple Are Underperforming in China Market: Expert
"I think Apple is starting to understand that there is massive demand for their products, people in China absolutely love the products you see sales have gone up 600 percent in the last two years and now Apple is managing the process a little bit better," Shaun Rein, managing director at China Markets Research, told CNBC.

Workers assembling Apple products like iPads for Chinese suppliers have also made headlines over harsh and dangerous working conditions. Last year, two explosions at iPad factories killed four people and injured 77.

Friday's launch was a relatively low-key event, unlike the usual chaotic scenes ranging from long overnight queues to egg-pelting incidents that have marred previous Apple launches.

But according to New York-based Brian Blair, Principal and Senior Research Analyst at equity firm Wedge Partners, the demand for Apple products has become a "phenomenon" in China; and the delay, because of the country's regulatory environment, actually works in Apple's favor.

"I actually think they [Apple] can build up demand," Blair said. "You get this pent up demand effect where people see it [iPad] being smuggled in from Hong Kong and it exists in the country and it creates increased demand for it," Blair said.

The lack of competitors for the iPad in China's tablet space also gives Apple an edge, according to Blair.

Apple's sales in Greater China, which include Hong Kong and Taiwan, jumped threefold to $7.9 billion in the fiscal second quarter ended March. That made up about a fifth of its global revenue. The iPad is a big factor behind sales in China, dominating 76 percent of the tablet PC market.

"If you have to point to a competitor — you point to Samsung, but it's certainly not something that is neck and neck on the tablet side, where on the smartphone side they're very much neck and neck with Apple, especially over there."

By CNBC's Rajeshni Naidu-Ghelani.

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