Print 28 comment(s) - last by paydirt.. on Aug 27 at 2:26 PM

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

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By jvillaro on 8/24/2012 2:11:32 PM , Rating: 4
I mean come on that "MI2 from Xiaomi Technology" looks like the love child of an iPhone and a Lumia the the personality of an Android

By jvillaro on 8/24/2012 2:12:34 PM , Rating: 2
...with the personality...

By Slyne on 8/24/2012 2:32:30 PM , Rating: 2
Are you implying someone should sue them?

By retrospooty on 8/24/2012 2:35:04 PM , Rating: 5
It is a rectangluar shaped phone. Apple seems to think they own that design.

By spamreader1 on 8/24/2012 2:57:10 PM , Rating: 2
Holy cow you're right, with rounded edges to boot!

By retrospooty on 8/24/2012 3:18:56 PM , Rating: 4
The good thing about China, is their court system will do what the US court system should have done... They will tell Apple to go for a long run on a short pier.

By jdietz on 8/27/2012 1:19:39 PM , Rating: 4
Can't. They're Chinese.

The phone can't be sold in the western world, but if they only sell in China, then no problem. Chinese companies can infringe any patents they want. Put another way, they don't need to worry about patents. They only need to watch out for the Chinese government who can take everything they have on a whim.

By Theoz on 8/24/2012 4:37:47 PM , Rating: 2
How else would you make a touchscreen smart phone look? There aren't a lot of options imo.

By Mitch101 on 8/24/2012 4:55:57 PM , Rating: 2
Unleash the power and it has 50L of Memory

By ViroMan on 8/24/2012 6:13:49 PM , Rating: 3
Make it a round phone instead of a rectangle?
How about a square?
Damn I need to hurry up an license that right now.

By jvillaro on 8/25/2012 1:46:25 AM , Rating: 2
So... you didn't get a little hint of sarcasm?

By Kiffberet on 8/26/2012 6:20:07 AM , Rating: 2
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!

By paydirt on 8/27/2012 10:32:01 AM , Rating: 2
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.

By drycrust3 on 8/24/2012 4:42:14 PM , Rating: 2
And the second is that the alternatives are becoming much more attractive than a year ago.

A point that is understated in this comment is the price of the iPhone in comparison to the alternatives. For example, when the the Xiaomi phone was released last year it sold for RMB1999 = US$314, in comparison to a grey market imported iPhone 4s price of RMB 7000 - 8000 (US $1000 to 1250).
To me, the reason why Apple's iPhones sold so poorly is obvious: it was an expensive foreign import that was unsupported by the foreign parent company, with no guarantee it would work on the local networks. In short, no one with any sense would buy one.

RE: Competitors.
By derp on 8/24/2012 8:32:59 PM , Rating: 2
but they do

they make the things there in china and they know they are making the knockoffs better than the original anyway. so why buy an apple when the locla knockoff is better and cheaper?

RE: Competitors.
By Jeffk464 on 8/25/2012 12:04:19 AM , Rating: 2
Foreign import? It can leave the factory by truck and be in Chinese stores that day.

RE: Competitors.
By Jeffk464 on 8/25/2012 12:05:51 AM , Rating: 3
If apple provided american workers with jobs I would be somewhat supportive but they turned their backs to the american worker so F-them.

RE: Competitors.
By kmmatney on 8/25/2012 6:49:23 AM , Rating: 2
Apple's A5 chips are made by Samsung in the U.S. In fact they are expanding the Austin Samsung facility to make more products for Apple, so if anything Apple is one of the few tech companies that are expanding U.S. jobs.

RE: Competitors.
By Kiffberet on 8/26/2012 6:12:01 AM , Rating: 2
Dude, you have to realise that Americans don't work for $250 a month. They want $2000. A high school level educated Chinese factory worker will put in 16hr days, 6 days a week for $250. That's why apple makes phones in china and not America. They'd have to charge $2000 a phone just to break even. Fortunately, with American wages plummeting, because the economy is a shambles, in a decade or so there will be plenty of companies returning to the US to build there wares, providing millions of $250 a month jobs. Of course none of those workers will be able to afford the things they make, but at least you can feel happy that it's made in the US.

RE: Competitors.
By paydirt on 8/27/2012 2:26:48 PM , Rating: 2
Another reason and Steve Jobs did say this to Obama is that they needed 30,000 engineers to get it going and those engineers weren't available in the U.S. We need to reduce worker Visa restrictions so tech companies can get all the engineers they need into the U.S.

By Uncle on 8/24/2012 2:52:06 PM , Rating: 5
The key word here is "COMPETITIVE". Its a foreign word in the North America market. The only way to keep or gain market share is to SUE, in N America. Monopolize and Sue are the word most Corporations in N America understand. Now those words arn't foreign to apple. If apple wasn't an American Company, I don't think it could get away with the crap their foisting on to the Consumers, I'm not talking product, I'm talking attitude, and mentality. What was that news item about apple being involved with 60% of all patent lawsuits. One of the reasons the iphone looks so good in N America is that the better and innovative phones are kept out of the N American market. apple can only pretend, using the boys club media, to be the best in town.
Examples HDTV kept out of N America approximately 10 yrs so USA could control the DRM standards and license to foreign companies instead of the other way around. Cell phone technology standards one generation ahead in Europe and Asia before USA adopts. USA has shown that to compete, one must buyout or Sue them out of business. Mean while the N American companies play their silly little games in court, the consumer loses big time. The USA talks the talk when it preaches FreeTrade, but doesn't walk the walk when true competition comes. Then the import barriers and the court system all come into play. The consumer knows, look at the crap with Regional DVD's, one region pays more or less then another. They wonder why theirs piracy. When USA companies sell software, movies,etc, cheaper in china then in their own country. No wonder consumers are pissed off in USA when they hear and read that. Their paying a higher price to subsidize the people in other nations such as China because they can't compete. Just my perspective at whats happening.

RE: competitive
By spamreader1 on 8/24/2012 3:00:32 PM , Rating: 4
Don't lump Canadians in with the US with N America. Hate to admit it being a US citizen, but those guys in the great white north have some good things over us when it comes to business laws and patent system.

RE: competitive
By ritualm on 8/24/2012 9:48:14 PM , Rating: 3
The worst part about Canada is a total lack of competition in certain industry sectors, and surprisingly it's a lot worse than USA at times. Look at the wireless telcos for just one example, another being home internet services.

You think being locked to two-year smartphone plan contracts is bad? Try three years.

Also, the Canadian version of RIAA is just as dumb as the real thing south of the 49th Parallel.

By GotThumbs on 8/24/2012 2:50:26 PM , Rating: 2
I think the key point is....Iphone has not changed much.

Come on...the Iphone and IProducts only change in small increments. Apples trend has been to make upgrades using existing components from its other products parts bin. IProducts share many similar components...except for obvious differences. Screen size versus makes calls. All use the same IOS. Nothing earth shaking over time....just lots of fanbois buying each version. Apples best customers are its current customers. IMO.

By Jeffk464 on 8/25/2012 12:10:06 AM , Rating: 2
Yup, when I got my galaxy nexus the iphone wasn't even in the same league hardware wise. The new iphone is basically going to be catching up to my 8 month old phone.

No mention about cost?
By zlandar on 8/24/2012 4:14:07 PM , Rating: 2
The article makes zero mention whether people are buying non- iPhones at the same price point.

Chinese sell their kidney for an iToy
By Pirks on 8/24/2012 2:53:47 PM , Rating: 1
because they "Aren't as Interested in Buying Them"

A flawed analysis
By name99 on 8/24/12, Rating: 0
"If you can find a PS3 anywhere in North America that's been on shelves for more than five minutes, I'll give you 1,200 bucks for it." -- SCEA President Jack Tretton

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