Apple's China fortunes rise, despite sagging market share

Apple reported strong growth in the Chinese market, with revenue up from iPhone sales

A cheaper iPhone ? A deal with China Mobile ? Despite having neither of the two, Apple reported strong earnings in the Chinese market in its fiscal first quarter, with revenue buoyed by triple digit growth in iPhone sales.

The company's revenue for the Greater China region, which includes Hong Kong and Taiwan, grew 67 percent year-over-year, Apple said in its financial results on Wednesday. A high point in the robust earnings was the "exceptional growth" in iPhone sales in the region, which more than doubled from the same period last year, stated its CEO Tim Cook in an earnings call.

The U.S. tech giant is paying increasing attention to China, with Cook stating earlier this month he expected the country to one day become its largest market.

But Apple will have to contend with the rising presence of local Chinese handset makers, which are dominating the sector with low-end handsets, priced sometimes five times cheaper than the iPhone.

The absence of a lower-priced iPhone, and the lack of a deal to sell its product through the nation's largest carrier, China Mobile, have often been seen as factors limiting Apple's growth in the country. In contrast, rivals such as Samsung, Lenovo, Huawei and ZTE offer a wide range of handsets through China's different carriers, and led the nation's smartphone market ahead of Apple in last year's third quarter.

Apple, however, still has great potential in the market, as evidenced from surging iPhone sales, said Teck Zhung Wong, an analyst with research firm IDC. "Whether they're going to come out with a cheaper iPhone or new models, I don't think that's such a crucial factor," he said. "Every time they come out with a product refresh you'll still see a big spike in the launch quarter."

This past December, Apple launched its iPhone 5 in China, which is expected to have boosted the company's market share in the fourth quarter of last year. Apple's share dropped from 19 percent in the first quarter of last year, to 10 percent in the second, and then further declined in the third, Wong said.

But despite the sagging market share figures, Apple's smartphone shipments in China have consistently grown because the nation's smartphone sector is booming in size. In the third quarter, smartphone shipments to the nation's market reached over 60 million, about 2.5 times more when compared year-over-year, Wong said.

"If you look at Q3, and how Apple's market share was less than ten percent, people will just scream and say Apple is going downhill," Wong said. "But Apple has been shipping more units than before, so it has a good performance if you look at it this way."

To further drive growth, Apple is seeking to build more stores and expand its distribution in the country. In Wednesday's earnings call, Cook said Apple increased iPhone points-of-sales in China from 7,000 to over 17,000. Already, the company has 11 Apple stores in mainland China and Hong Kong, five of which were just built last year, and more are on the way.

"What Apple is saying is clear, there is a lot of potential for China," said Nicole Peng, an analyst with research firm Canalys. "But whether the potential is available to Apple, that's another issue."

The company has saturated China's largest population centers, such as Beijing, Shanghai, Shenzhen with sellers and advertisements. But to fully expand its business, Apple needs to bring more product distribution and ads to China's numerous smaller cities, where local handset makers are dominating, she said.

Sandy Shen, an analyst with research firm Gartner, said Apple will likely refrain from selling a cheaper iPhone in order to maintain its high profit margin and brand image. But to help customers more easily afford Apple's often high-priced products, the company in January started to offer installment payment plans for eligible consumers in China.

Still, even with attractive payment plans, China's low-end handset manufacturers will continue to squeeze Apple's presence in the market, analysts added.

"Apple is going to face market share pressure, because more and more vendors are dominating the lower-end market, and the higher-end is going to shrink," Shen said. "So I think at best, Apple can maintain their single digit market share for the next few years."

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags Applesamsungdistributionconsumer electronicssmartphonesiPhone

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Michael Kan

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?