One Word That Describes Apple in China

There's one word to describe Apple's (NAS: AAPL) iPhone opportunities in China: "brobdingnagian." The adjective is a reference to the land of Brobdingnag in Gulliver's Travels, a land occupied by gigantic inhabitants of enormous proportions. With some recent estimates from Morgan Stanley analyst Katy Huberty, Apple's China opportunity would feel right at home in Brobdingnag.

China Unicom (NYS: CHU) continues to be the only official iPhone carrier in the country, but China Mobile (NYS: CHL) and China Telecom (NYS: CHA) are shoo-ins to get the device someday soon. Huberty thinks that this day will come for China Telecom within a matter of months, with China Mobile following late this year or early in 2013. The China Telecom timeframe makes sense, considering its recent regulatory clearance.

Huberty thinks that the current arrangement with only China Unicom allows Apple to tap into at most 10% of the "high-end" market of Chinese mobile subscribers, a market she estimates at roughly 150 million. About 120 million of those users are at China Mobile, which already counts at least 10 million unlocked iPhone users, despite being relegated to 2G data speeds similar to those running iPhones on T-Mobile's network domestically.

Huberty's estimates of iPhone penetration within the high end are 7%, 8%, and 20%, for China Telecom, China Mobile, and China Unicom, respectively. If Cupertino can hit 20% penetration, it should see a minimum of 24 million more iPhone sales, which would crank up the bottom line to the tune of $6.50 per share. When factoring in the acceleration of 3G adoption within China thanks to the growing middle class, that figure could reach 40 million next year, or $10 per share in additional earnings.

Looking farther out, Huberty thinks Apple will reach iPhone penetration levels in China similar to that of AT&T (NYS: T) domestically, which she pegs at 63% of smartphone buyers. Under the best-case scenario, she thinks Apple will reach 57 million annual iPhone sales in China alone in a couple years.

Using the $659 iPhone average selling price last quarter, 57 million units turns into $37.5 billion in revenue. That's even conservative, considering iPhone ASP has been on the rise. That's $37.5 billion from one product within one geographic area, albeit the most important product in the most important area.

These are but one analyst's estimates, and now that Apple has resumed its habit of pounding estimates, you can see why China is one of the best reasons you should still buy Apple.

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At the time thisarticle was published Fool contributorEvan Niuowns shares of AT&T and Apple, but he holds no other position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of Apple and China Mobile.Motley Fool newsletter serviceshave recommended buying shares of Apple and China Mobile.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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