Chinese Produce iPhones, But Aren't as Interested in Buying Them
August 24, 2012 1:24 PM
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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.
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RE: Wow the Chinese really are serious about originality...
8/26/2012 6:20:07 AM
I was in Hong Kong last week and virtually everyone had an iPhone. I couldn't believe it when looking around the people on the subways. I only guessing but in main land china, which isn't as prosperous, they don't sell as many iPhones because not as many people can afford them. But what I do know about the Chinese is that they admire status, and iPhones are the ultimate status phones. Everyone wants one, they just can't afford them. With their economy expanding at 8% year on year, more people will soon be able to afford iPhones and will choose one over anything else, whether the competitors phones are better and cheaper or not. But Apple shares!
RE: Wow the Chinese really are serious about originality...
8/27/2012 10:32:01 AM
China's economic growth is slowing significantly. Electricity usage is down (why would it shrink in a rapidly growing economy?). Manufacturing profits are down. Exports are down. China invested in all the "low hanging fruit" and further economic growth will be more difficult.
I wouldn't count on fast China sales growth when deciding whether or not to own Apple stock. If it happens, it would be a bonus to the stock owner.
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