Apple Wants Another Bite Out of China

NEW YORK ( TheStreet) -- Apple ( AAPL) CEO Tim Cook was spotted in China recently, his third such trip to the Far East, as he attempts to restart sluggish revenue in what many believe will be the tech giant's most important market.

Chinese Web site Ifeng reports Cook recently met China Telecom ( CHA), presumably to discuss the relationship between the two companies.

Presently, China Telecom and China Unicom ( CHU) are the only carriers in China that have access to the iPhone. The world's largest carrier, China Mobile ( CHL) does not have an official deal with Apple although there are reports of as many as 10 million iPhones on the China Mobile network.

It's unclear if Cook has met with China Unicom and China Mobile during the visit, though the Apple chief has met with China Mobile in the past, to discuss "matters of cooperation."

China has become an increasingly important area for Apple, as it seeks to expand iPhone access to as many customers as possible. However, revenue for Greater China in Apple's fiscal third quarter fell to $4.64 billion, down from $8.21 billion in the prior quarter, and $5.39 billion in the year-ago period.

On Apple's recent earnings call, Cook noted that some accounting and inventory factors weighed on China, but it wasn't clear what exactly happened. He noted that sell-through in China (which includes Hong Kong) was down 4% year over year, with Hong Kong down a lot, but mainland China actually up 5% year over year. That growth rate is lower than Apple's accustomed to, with Cook noting it could be attributed to "many things, including the economy there. "Hong Kong is an international shopping haven as you know for not only tourist but also some resellers and we saw more dramatic downturn there," he said. "It's not totally clear exactly what had occurred but it was down on a sell through basis by about 20% so that weighed greater China down as you can see in your data sheet."

Perhaps some of the issue can be attributed to price, though it's not clear if that's the sole reason. IDC recently noted that companies like LG, ZTE and Lenovo gained market share, specifically citing strength in Asia/Pacific for ZTE as a reason. Apple's iPhone is comparatively much more expensive than other handsets from the aforementioned hardware manufacturers.

Apple is reportedly working on a lower-cost iPhone as a way to combat some of the lost market share.

Pricing on the cheaper iPhone is still undetermined, with some analysts believing it could be as low as $329, unsubsidized. The average selling price (ASP) for the iPhone in Apple's fiscal third quarter fell below $600 to $581, further fueling speculation of a low-end phone.

In the past, Cook has said that China is incredibly important to Apple, so those results are obviously troubling to him, and a visit to China may have been caused by the troublesome numbers. He reiterated on the earnings call that China is incredibly important to Apple, despite the troublesome numbers from the most recent quarter. "And so I continue to believe that in the arc of time here, China is a huge opportunity for Apple and I don't get discouraged over a 90-day cycle that can have economic factors and other things in it," he said.

Apple is attacking China head on, and Cook's visit to the country is indicative of that. The tech titan plans to double the number of retail stores in China over the next two years, as well as raise the number of iPhone and iPad points of sales, which Cook noted are lower than Apple would like.

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-- Written by Chris Ciaccia in New York

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