China is Apple's fastest growing market for iPhone

Apple's iPhone sales for the first three months of 2011 in "Greater China" increased by almost 250 percent

While Apple's iPhone is selling well across the globe, China has emerged as its fastest growing market for the device.

In a conference call on Wednesday, Apple Chief Operating Officer Tim Cook, said that for the first three months of 2011, iPhone sales in "Greater China" grew by almost 250 percent from the same period last year. This brought Apple's revenues in the first fiscal half to just under US$5 billion for the Greater China market, an increase of almost four times from 2010.

The $5 billion generated represents about 10 percent of Apple's revenues, Cook added in the conference call. "So we're extremely happy with how we're doing in China," he said. In the U.S., iPhone sales grew by 155 percent.

It's unclear, however, where in China the device is selling the most. Cook's reference to Greater China includes the mainland, Hong Kong and the island of Taiwan, said Apple spokeswoman Carolyn Wu.

But analysts have said that in mainland China, Apple is seeing a major shift with how consumers are viewing the iconic smartphone. When Apple's iPhone 4 launched there in late September, it was a hit with Chinese consumers, quickly selling out and leading to shortages.

Earlier versions of the iPhone had not met with the same reception, said Mark Natkin, the managing director for Beijing-based research firm Marbridge Consulting.

Apple didn't officially begin selling the iPhone in mainland China until late 2009, more than two years after it was launched in the U.S. Even then, the iPhone sold in the country was designed without Wi-Fi capability, in order to comply with Chinese technology regulations at the time.

"Eventually Apple was allowed to offer the iPhone with Wi-Fi functionality," Natkin said. "But by the time they were allowed to do so, the global launch of the iPhone 4 was just some months away. So again many users just waited for the right time."

The iPhone 4's appealing features and user interface have made it an attractive smartphone for buyers in China, Natkin said. Furthermore, the device is a status symbol in China, he added.

"If you look at the Apple experience store in Beijing, it's packed everyday," he said. "People have a very high regard for the Apple brand and for its ability to innovate."

But even as Apple's COO noted the strong sales of the iPhone in China, the device is far from becoming the dominant presence in the country's smartphone market.

At the end of 2010, Apple had 8.3 percent of China's smartphone market, an increase from the 5.4 percent it held at the beginning of the year, according to Beijing-based research firm Analysys International. Nokia, Samsung and Motorola continue to lead in the market.

"It's true the iPhone has sold well, but in China, Apple's share of the market is still small," said Wang Yan, a senior analyst with research firm Ovum. In the U.S., Apple leads the smartphone market with a 28.6 percent share, according to data collected by The Nielsen Company.

Apple's iPhones could have been selling better in China, but the company only slowly began realizing its marketing strategy, Wang said. Analysts have pointed to the supply shortages of Apple's iPhone 4 in China, which lasted for months, along with the company's smaller distribution network for the device in the country.

"I don't think Apple has made China an important market. But I think in the future they will do a better job of paying attention to it," Wang said.

China has more than 850 mobile phone users. Smartphone sales in the country reached an estimated 62 million units in 2010, and are expected to jump to 95 million for this year, according to Analysys International.

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Michael Kan

IDG News Service
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