Photo: Roy Zipstein
If the two most important words of Apple’s earnings call last month were “fall transition,” then the third most important word was probably China.Tim Cook repeatedly emphasised the company’s growth in Greater China during the call, noting that iPhone sales increased 100% year-over-year. “We see China as an enormous opportunity,” Cook said.
There’s just one problem: Right now, Apple is losing in China.
“Apple is under performing in China. They are actually losing market share in the smartphone market.” said Shaun Rein, managing director of the China Market Research Group and author of the new book The End Of Cheap China. “Samsung is taking share at the high-end while Chinese phone maker Xiaomi is taking share at the low end.”
Indeed, the latest data from Canalys show that Apple fell to fifth place among international smartphone vendors in China last quarter, as iPhone shipments in the country declined by 37% quarter-over-quarter.
There’s no doubt that Apple has enormous potential in the country, but according to Rein, Apple won’t meet that potential unless it fixes a few glaringly obvious mistakes that it’s making right now:
- Apple needs a lot more retail stores in China. Right now, Apple has just six retail stores to cater to the hundreds of millions of potential customers in China. The company is reportedly planning to open two more retail stores in the country, but that still doesn’t really scratch the surface.
- Apple still isn’t partnered with the right carrier in China. The iPhone is available on China Unicom and China Telecom, but not the carrier with the largest number of subscribers in China (and the world), China Mobile. According to Rein, it’s not just that China Mobile has more subscribers, it’s also that the carrier has wealthier subscribers who are willing to spend more on data and calling plans. “Apple is not selling to heavy users yet,” Rein says. “Right now they are selling to price-sensitive customers.” To be fair, analysts generally expect Apple will launch an iPhone on China Mobile by the end of this year or early next year, but until it does, the company is losing out on valuable customers.
- Apple treats Chinese consumers like an afterthought. “They always release products here way behind other markets and they don’t localise,” Rein said. For example, he notes that Siri still isn’t available in Mandarin (although it’s coming with the next iOS update).
“These obstacles are not insurmountable,” Rein said, and Apple is already taking steps to fix these issues. “In the handset market, nobody is super entrenched, which is why Apple needs to get their act together.”