Chinese Produce iPhones, But Aren't as Interested in Buying Them
August 24, 2012 1:24 PM
comment(s) - last by
Apple market share in the world's biggest smartphone marketis halved in Q2
While Apple, Inc. (
) 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. (
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. (
), 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. (
) -- makers of the Intel Corp. (
-- rose to second, seizing 11 percent of the market. Lenovo is currently in second place in PC sales as well, globally. ZTE Corp. (
) 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."
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. (
) side of the fence, Qualcomm, Inc. (
) 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. (
) EVO 4G LTE and
Samsung's Galaxy S III LTE
sold in the U.S.
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.
This article is over a month old, voting and posting comments is disabled
A flawed analysis
8/24/2012 3:46:31 PM
If all you're interested in is being a cheerleader for Team Larry vs Team Tim, feel free to enjoy the above analysis.
If you want to REALLY understand what's going on in China, a more thoughtful analysis is necessary.
In spite of what Jason seems to imagine, China is not 5 years ahead of the US in phone tech. China has about 850 million users on 2G, and about 150 million on 3G.
About 70% of the 2G users are with China Mobile. About 30% of the 3G users are on China Mobile. In other words, China Mobile represents the huge pool of non-leading-edge users who are transitioning to 3G, but doing so slowly.
Next important point is that Apple doesn't have a distribution agreement with China Mobile.
So in other words, what we have is something essentially analogous to the US in 2007 --- China Mobile represents VZW and a huge pool of users that (whether or not they want iPhone) can't get it on their network. The reduction in Apple's fraction of smartphones primarily represents the slow, but massive, ongoing, and increasing migration of China Mobile users to 3G.
What happens next? Not clear. There are likely various political issues surrounding Apple getting involved with China Mobile, and I don't think any of us have any useful knowledge about that.
Also important is that there are TECHNICAL issues. China Mobile, rather than adopting WCDMA or CDMA2000 for its 3G tech, adopted a home-grown technology, TD-SCDMA. This has meant in the past that Apple's phones simply could not work with China Mobile. But it certainly seems likely that Apple will use Qualcomm's 9615 in the iPhone Next, and that chip does support TD-SCDMA.
- the above analysis ignores the essential factor driving the numbers --- the massive weight of China Mobile in the market, and its historical trajectory
- this has the potential to change with iPhone Next, which at least technically, can now work with China Mobile
- the blather about how advanced phones are being demanded by the China market is pure bullshit. Of course there is some tiny 0.1% of the population that insists on having the newest fanciest phone available in the entire world. But what most companies care about is the mass market. Remember those numbers: the mass market right now is 850 million 2G phones, and 150 million 3G phones. What matters is how those 850 million users switch to 3G, not how some millionaires in Shanghai are itching for the newest LTE phones.
"And boy have we patented it!" -- Steve Jobs, Macworld 2007
LG's New Dual-Function Display Tech Hit Mass Production, Headed for iPhone
August 23, 2012, 12:31 PM
China Labor Watch Releases Poor Report on Apple Supplier's Working Conditions in China
June 29, 2012, 2:05 AM
Samsung Galaxy S III To Hit all Four Major U.S. Carriers Starting at $199 on June 21
June 4, 2012, 9:48 AM
Intel Announces Earnings, Its First Smartphone Launches This Week
April 18, 2012, 11:33 AM
Qualcomm Announces Snapdragon 4 "Pro" CPU, Pumps Up Onboard GPU
February 27, 2012, 9:38 AM
UK Teachers Want Parents to Cut-Off Their Children's Internet, Tablet Use at Night
April 17, 2014, 3:40 PM
Quick Note: Chrome Remote Desktop App for Android Launches
April 17, 2014, 9:26 AM
Report: Apple Plans to Integrate Shazam Song Finding Functionality into Siri
April 17, 2014, 9:15 AM
Bring Your Own Battery: LG Isai FL Likely is G3, First U.S. Quad-HD Android
April 16, 2014, 7:38 PM
Project Moonshine: Google's Plan to Flatten Android App Icons Leaks
April 16, 2014, 1:46 PM
Apple, Microsoft, and Major U.S. Wireless Carriers Embrace Smartphone "Kill Switch"
April 16, 2014, 10:08 AM
Most Popular Articles
Cities to Carpoolers: Sharing Your Car is Illegal, We Will Seize Your Cars
April 4, 2014, 9:17 PM
iPad Exploiter is Freed by Federal Appeals Court
April 11, 2014, 7:40 PM
A-10 Warthog May Live to Fight Another Day with Support from Lawmakers
April 14, 2014, 9:41 AM
Taiwan's AOU Claims to Have World's Highest-Res. OLED Smartphone Display
April 11, 2014, 1:44 PM
EFF: NSA May Have Used IRC Botnets to Exploit Heartbleed for Last Two Years
April 14, 2014, 4:43 PM
Latest Blog Posts
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
Global Cyber Espionage Concerns Reveal Growing Cyber Armies
Nov 29, 2013, 11:04 AM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information