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Apple market share in the world's biggest smartphone marketis halved in Q2

While Apple, Inc. (AAPL) is based in Cupertino, Calif., China is the company's home away from home; the place where all of its i-gadgets are assembled.  But in the birthplace of sparkling new iPhones, the world's most populous nation and largest smartphone market, Apple is struggling.

I. Apple Falls to Fourth

In Q2 Apple fell to fourth place in this massive market, with the IDC Group reporting market share plunging from 20 percent to 10 percent.  Gartner, Inc. (ITreported a smaller drop from 17 to 12 percent.  Regardless of which numbers are correct, the consensus is Apple struggled in China; at least for a quarter.

Samsung Electronics Comp., Ltd. (KSC:005930), Apple's bitter perennial rival also fell slightly from 21 percent to 19 percent, but clung to the top sales spot.  Meanwhile, a local firm, Lenovo Group, Ltd. (HKG:0992) -- makers of the Intel Corp. (INTC) x86 Android "LePhone" -- rose to second, seizing 11 percent of the market.  Lenovo is currently in second place in PC sales as well, globally.  ZTE Corp. (SHE:000063) also did well, moving past Apple and into third place.

So why are the Chinese turning there back on the iPhone, long considered a coveted status symbol among Chinese youth?  IDC analyst TZ Wong suggests, "There are two things in play.  One is seasonal; people know the new phone is coming. And the second is that the alternatives are becoming much more attractive than a year ago. The iPhone didn't change much over the year."

China iPhone 4S
The iPhone 4S has not been selling great in China from April to June.
[Image Source: Reuters/Jason Lee]

II.  The Chinese Hardware Market Gets Competitive

One thing that has begin to impact Apple's sales is a faster pace of hardware turnover on the Chinese market.  Traditionally, China received hardware that was dated by U.S. standards.  Today it's getting bleeding edge hardware that American buyers don't have access to.

For example Lenovo -- or any manufacturer for that matter -- has yet to release an Android smartphone in the U.S. powered by Intel's chips.  And on the ARM Holdings plc. (LON:ARM) side of the fence, Qualcomm, Inc. (QCOM) is shipping Snapdragon 4 chips to Chinese Android smartphone makers.

Huawei's G330D and Xiaomi Technology's MI2 both have Snapdragon 4 chips, just like the HTC Corp. (TPE:2498) EVO 4G LTE and Samsung's Galaxy S III LTE sold in the U.S.

Xiaomi MI2
Domestic phonemakers have stepped up their game with handsets like the Snapdragon 4-powered MI2 from Xiaomi Technology. [Image Source: Xiaomi]

In short, Chinese buyers are turning away from iPhone and towards domestic brands not solely out of a sense of national pride, but largely because the domestic players are putting out handsets with hardware that surpasses that found in the current generation iPhone.

Apple is far from out of the Chinese market, with its next generation smartphone incoming in only a few weeks, but it has its work cut out for it in these competitive times.

Source: Reuters





"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA



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