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Apple Looks Set to Launch Cheaper iPhone by the Third Quarter


Alibaba and China National Petroleum also make the news.

China Watch: Top Business News From the World's Second Largest Economy

Is Apple (NASDAQ:AAPL) preparing to launch a lower-end iPhone this year? Speculation is rife after Apple supplier Pegatron said that it plans to increase its workforce in China as much as 40% in the second half of the year.

Pegatron chief financial officer Charles Lin also added that he expects 60% of his firm's 2013 revenue will come from the second half.

A Reuters report notes that suppliers have told the agency Apple is planning to introduce a cheaper iPhone by the third quarter to target emerging markets like China and India.

According to a recent note by Morgan Stanley analyst Katy Huberty, a lower-priced iPhone could help Apple triple its current market share in China.

"Even in a scenario of low 40% gross margin and one-third iPhone cannibalization rate (flattening legacy iPhone shipment growth, which we view as conservative, the iPhone Mini adds incremental revenue and gross profit dollars," said Huberty.

Meanwhile, Apple has jumped right back into the top five of China's smartphone market in the first quarter of 2013. According to a report from Canalys, Apple moved up a spot to fifth, with an 8% share, thanks to strong iPhone 5 sales and reduced prices of older iPhone models.

Samsung (OTCMKTS:SSNLF) continues to lead the market with a 20% share, while Yulong Computer (HKG:2369), Huawei and ZTE (SHE:000063) followed behind.

The Beijing Business Daily also reported this week that the next China Apple store might be under construction right now in the capital city. According to sources quoted by the publication, the store will open towards the end of the year in conjunction with the release of the next iteration of the iPhone.

Currently, Apple has 11 stores in China, including three each in Beijing, Shanghai, and Hong Kong, and one each in Chengdu and Shenzhen.

Alibaba Buys Stake in AutoNavi

E-commerce giant Alibaba Group will splash out $294 million for a 28% stake in AutoNavi (NASDAQ:AMAP), an Internet mapping company.

The purchase is in line with Alibaba's strategy of expanding its smartphone services offerings. Last month, the company bought an 18% stake in Sina's (NASDAQ:SINA) Weibo, China's microblogging Twitter equivalent.

"This new alliance reflects our vision for the future of the mobile Internet," Jack Ma, executive chairman of Alibaba and the company's figurehead, said in a statement. "We're pleased to work with partners such as AutoNavi to develop terrific applications and services that bring more convenience, fun, and joy to our users. We'll continue to work toward this goal with tireless enthusiasm."

Forrester analyst Bryan Wang explained to the Wall Street Journal how Alibaba could take advantage of AutoNavi and Weibo to sell advertising.

"If I know you're at the Gap (NYSE:GPS) store, I can push a Uniqlo advertisement to you [on your smartphone] and you can compare that… Then with Sina Weibo you can share the experience…there are many ways you can leverage this ability," he said.

April Auto Sales Rise in China

Despite a lackluster economic recovery, China auto sales rose 13% in April to 1.8 million vehicles, compared with 1.62 million a year ago.

"The result reflected strong consumer demand as well as a good inventory management by dealers," said UBS Securities in a research note. Sales of passenger cars improved 13% to 1.44 million vehicles.

Sales improved even though China's economic growth has slowed to 7.7% in the first quarter from 7.9% in the last quarter of 2012.

Japanese carmakers reported better April results overall compared with the last month. Nissan (OTCMKTS:NSANY) posted a 2.7% year-over-year increase in April sales after a 17% plunge in March. Toyota (NYSE:TM) saw sales fall 6.5% last month, though that was still better than the 17% slide in March. Similarly, Honda Motor's (NYSE:HMC) 2.4% April sales dip was an improvement over March's 6.6% drop.

American auto companies reported stronger results than their Japanese counterparts. General Motors (NYSE:GM) said sales of GM-branded cars and those of its Chinese partners jumped 15.3% last month to 251,870 vehicles, while Ford (NYSE:F) reported a sharp 37% increase to 75,337 vehicles.

CNPC Makes Move to Buy Brazil's Barra

China National Petroleum Corporation is in negotiations to buy Brazilian oil company Barra Energia Petroleo e Gas for $2 billion, Bloomberg reported, adding that a deal could be reached by the end of the month.

Backed by government funding, Chinese energy firms have been on an aggressive foreign acquisition spree in the past few years in order to secure domestic energy needs.

"It looks like the state-owned CNPC can gain access to one of the largest offshore reserves in the world through the deal, and build a foundation for long-term development in South America," Shi Yan, an analyst at UOB-Kay Hian in Shanghai, told Bloomberg. "Buying up assets from South America has long been part of CNPC's global strategy to build up exploration and refining portfolios in different continents."

Twitter: @sterlingwong
No positions in stocks mentioned.
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