Apple in China: not as cool as before

These are not happy days for Apple in China. The iconic American brand, outpaced by Samsung in its appeal among Chinese consumers since last year, is now also losing out to other smartphone competitors.

According to IDC, Apple’s share of the Chinese smartphone market by shipments fell by nearly half to 10 per cent in the second quarter from three months earlier. The company came fourth in a ranking topped by Samsung and Lenovo, the Chinese company that is also the world’s second-largest PC vendor.
IHS isuppli, another research firm, even sees Apple as an “also-ran” in China, trailing, with a market share of just 7.5 per cent, behind Coolpad, Huawei, Nokia and ZTE, as well as Samsung and Lenovo.
Coolpad, a former maker of feature phones that sells mainly in its Chinese home market, is now focused on smartphones as well. Huawei and ZTE, China’s two largest vendors of telecom equipment, are aggressively pushing into the smartphone market as growth in their traditional market for telecom network gear is slowing.
Lenovo leapt from seventh rank to number two with 11 per cent market share in just three months, according to IDC. “Both Lenovo and Coolpad have been rising pretty fast,” says Kevin Wang, director of China electronics research at IHS.
The difference in the two rankings is caused by different ways of counting shipments, particularly the extent to which subsidized shipments to carriers are counted.
But no matter whether it is fourth or seventh, Apple is clearly no longer Chinese consumers’ first choice – a problem that had already been flagged when the company disappointed investors with its results for the June quarter last month.
That is particularly hard for the US company is that the Chinese smartphone market is more important than ever. The IDC figures show that smartphone shipments overtook those of feature phones for the first time in the June quarter, accounting for 51 per cent of total handset shipments of 87m units in the world’s most populous country and largest mobile market by subscribers.
IHS says Full-year shipments are set to rise 141 per cent.
One reason Apple is falling behind is Chinese telecoms operators’ reluctance to subsidise the iPhone enough to make it competitive. While this affects all makers, Apple is especially exposed because its smartphone is the most expensive.
Another headache has been Apple’s reluctance to customize the device for TD-SCDMA, the Chinese homegrown 3G standard used by China Mobile, and thus making itself unattractive to subscribers of the world’s largest mobile operator.
That problem could go away when the iPhone 5 is launched later this year. The device is expected to come with a Qualcomm chip that is TD-compatible.
But there are other disadvantages. With a screen expected to measure 4 inches, the iPhone 5 is no longer cutting edge. “That would still be smaller than many of its Chinese competitors, which have 4.3-inch or 4.7-inch screens,” says Wang.