Apple struggles to take bigger bite out of China

Dec 17 2011, 01:36 IST
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SummaryApple’s share of China’s booming smartphone market has risen sharply in the past two years, but for now the company that sells the iconic iPhone is being outpaced by nimble rivals.

Apple’s share of China’s booming smartphone market has risen sharply in the past two years, but for now the company that sells the iconic iPhone is being outpaced by nimble rivals.

It is not that Apple’s iPhones and iPads are losing favour among Chinese consumers. The iconic products are flying off the shelves at Apple’s five flagship stores in Shanghai and Beijing, unauthorised sellers, and even from fake shops dressed up to look eerily like the real thing.

The problem facing Apple seems to be timing.

Network technology is not sufficient to fully support iPhone and iPad capabilities, while other handset makers supply phones that support the various mobile standards used in China.

A tie-up with another telecom service provider would help catapult Apple sales. But the biggest by far, China Mobile with more than 600 million subscribers, may not have matching technology in place commercially until late 2012 or 2013. Apple’s relatively rigid global pricing structure and limited range of models are allowing more flexible competitors to grab market share at a faster pace.

Apple’s smartphone market share has more than doubled since the first quarter of 2010, but others are doing better. Samsung Electronics market share has more than quadrupled over the same period.

“Apple’s strategy in China is to capture the higher-end segment, which is a big enough market for it to tackle,” said Jane Wang, an analyst at UK research firm Ovum.

“It has cut prices of some of its products, which will definitely be more affordable for some budget-conscious consumers, but it’s only going to go so far in lowering prices.”

China has more than 950 million mobile phone users, more than Europe’s entire population, and its economy is expected by many to overtake the United States as the world’s largest in 10 to 15 years.

Although Apple makes laptops, desktops and iPods, it generated about half its sales from iPhones in the fourth quarter, making the product key to success in China.

The US technology giant’s sales in Greater China — mainland China, Hong Kong and Taiwan — have been skyrocketing. Fourth-quarter revenue increased four-fold to $4.5 billion, out of a global total of $28 billion.

Demand is so strong in China that smuggling of real iPhones and sales of fakes are on the rise. Copy-cat stores masquerading as real Apple outlets — and selling genuine Apple products — have sprouted up everywhere from Beijing in the northeast to Kunming in the southwest.

The relatively high

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