Weak iPhone 4S Sales in Korea Shows Challenge for Apple in Asia

According to a report, sales of Apple’s (NASDAQ:AAPL) iPhone 4S are surprisingly slow in South Korea due to the hardware related problems, lack of compelling features and the lack of support for Long Term Evolution (LTE) technology. ^[1] We believe that if such trend persists in other Asian countries as well, it could be damaging to Apple’s prospects in the smartphone market. Samsung has already overtaken Apple in the smartphone market, and other Google (NASDAQ:GOOG) Android based smartphone could also gain from Apple’s weakness (Samsung Overtakes Apple, Can iPhone 4S Reverse This Trend?). Although Nokia’s (NYSE:NOK) fortunes have declined in the recent years, Apple’s weakness and its recent partnership with Microsoft (NASDAQ:MSFT) could also help it find an opening in Asian markets.

We maintain a price estimate of $502 for the Apple stock, which is about 35% above market price.

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Lack of features causing weakness

The report suggests that iPhone 4S sales have totaled between 150,000 and 300,000 units combined at SK Telecom and Korea Telecom, and that a number of pre-orders have recently been cancelled. These numbers are sluggish compared to the success that iPhone 4S achieved during the first three days of its launch in the U.S., when it sold more that 4 million units.

The issues include the bug in iPhone’s latest operating system which quickly drains the battery of iPhone 4S, and complaints among consumers on the noises that the device makes during calls and while operating video functions. Lack of important features such as support of Korean language for Siri functionality and lack of LTE 4G technology support is also seen as a barrier to the handset’s success.

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1. Why is Apple’s iPhone 4S fast losing luster?, The Korea Times, 23rd November, 2011 [↩]