iPhone Lack of Lines in China – A Reason to Panic?

Last Friday, Apple stock dropped about 4% because there were no lines in front of Apple Stores in China and “only” over 2 million iPhone 5’s sold in the first two days of availability. Should investors panic? NO, and here’s my take:

1. Improved Reservation System: After last year’s riots and egg-throwing at the China 4S launch, Apple instituted a more rationale (and safer) reservation/lottery system to address that situation. So lack of lines does not indicate a lack of interest – rather it is a successful implementation of an improved approach to retailing.  People have no reason to wait in a line if it does them no good.

2. Subsidized Phone Not There: Apple’s China stores are only offering full-price non-subsidized phones, while the carrier partners in China offer subsidized phones. Understandably, the lines were at the carrier outlets not at the Apple Stores.

3. More Distribution Options: Twice as many stores, twice as many carriers now. So there are more alternatives to Apple Stores in China

4. China Unicom Pre-orders: 300,000 ahead of launch vs 200,000 for the iPhone 4S. Hardly indicative of lack of interest.

For perspective, the Apple iPhone 4 launch in US, UK, France, Germany and Japan sold 1.7 million phones combined in those five countries over the first weekend in 2010, less than the “over 2 million” iPhone 5’s that Apple sold in China this past weekend in China alone.

Hardly a reason to panic -- Analysts need to take a deep breath and think before crying “WOLF” next time.