Apple Inc. Stymied by “Political Craziness” in China

Apple Inc. (NASDAQ:AAPL) is coming up against the implacable might of the Chinese government in their efforts to get their newest iPhone models sold in the country, and it’s a fight that could prove very costly to their bottom line for the rest of this year. As Gerber Kawasaki CEO Ross Gerber told Fox Business News today, the delays are not of Apple Inc. (NASDAQ:AAPL)’s choosing, but are the unfortunate reality of doing business in the communist country at times.

“Yeah, I mean it’s a totally unfair business practice. For the iPhone to be sold it has to be approved by the Chinese government, and obviously this has been going on for some time, and then they just don’t approve it. You know, the politics behind this is ridiculous. So we are giving 24 billion U.S dollars to Alibaba in an IPO, but we can’t even get an iPhone sold in China without the political craziness of doing business there,” Gerber said.

The delay is apparently the result of an impasse between China’s Ministry of Industry and Information Technology, and Apple Inc. (NASDAQ:AAPL), over details relating to the launch or the phones themselves. As a result, the phones have not yet been certified for sale in the country.

Gerber said that Chinese consumers would now be forced to buy the new iPhones on the black market or in Hong Kong, where pre-orders there reportedly sold out in two hours leading up to its September 19 release there. Part of that was due to the lack of a Chinese release date and the resulting black market that will develop for the phones as a result. It’s expected that iPhone 6’s smuggled into China by “mules” could fetch as much as four times their HK sale price.

For Apple Inc. (NASDAQ:AAPL), the China delays mean global sales of the new phones will be greatly impacted over the holiday season, and it’s still unclear when they will have access to China’s nearly 1 billion strong smartphone market. China Mobile, the country’s largest carrier with 800 million of those consumers still has no idea, and it may not be until next year.

Apple Inc. (NASDAQ:AAPL) is trading at $100.75 in afternoon trading, and are up 2.69% since their iPhone 6 and Apple Watch unveilings on September 9.

By Tim Frederick
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Gerber Kawasaki Inc, a registered investment advisor and separate entity from LPL Financial.