Is the iPhone failing to keep up in China?

Is the iPhone failing to keep up in China?

Summary: Despite launching on a second carrier, Apple's iPhone exclusivity is holding back sales in China. However, claims that it cannot compete with Samsung may be premature.

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TOPICS: iPhone, Mobility, China
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Last week, the Apple iPhone 4S began sales with its second Chinese partner, China Telecom. But experts are already questioning Apple's ability to catch up to its major rival, Samsung.

Apple currently holds a 7.5 percent share of China's mobile market, compared to Samsung's 24.3 percent. At the moment Apple is the fifth largest seller in the country, and according to Gartner analyst Sandy Shen, doesn't stand much chance of taking over first place.

"I don't expect Apple to replace Samsung any time soon," Shen said.

The main reason that Apple's shares are lagging behind is that the iPhone is only available on two of China's carriers.

"China Telecom is the nations smallest carrier, so the extent to which they can help Apple is quite limited."

Apple's major setback is that it has not yet partnered with China's biggest mobile network, China Mobile, which has over 655 million subscribers. China Mobile is currently the world's largest carrier.

Without China Mobile, Apple simply doesn't have the access to a majority of China's mobile market. The two mobile carriers Apple is partnered with have a much smaller pool of subscribers, meaning it only reaches 34 percent of that market.

China Unicom, which sold the iPhone 4S exclusively until last week, has only a third of China Mobile's users with around 195 million.

Many have suggested that Apple's exclusivity is what is holding it back, as well as the networks it has chosen to partner with.

Despite making the iPhone more available by partnering with a second network, China Telecom only has 62 million subscribers, so it can only provide so many new customers.

However, the suggestion that Apple stands no chance of really competing with Samsung might be premature.

China Mobile has previously stated that it has been unable to partner with Apple because the iPhone does not currently support its 3G (TD-SCDMA) network. It also revealed that Apple had promised an LTE-compatible iPhone. China Mobile is testing its LTE network, and hopes to have it completed by June.

Were Apple to follow through with their promise and produce an LTE capable iPhone, a partnership with China Mobile would definitely be a priority.

Considering that Apple's recently revealed third generation iPad is 4G and LTE compatible, is a newly compatible iPhone too far behind?

This situation is very similar to the iPhone's issues in Japan. By making the phone exclusive with smaller networks like Softbank and KDDI they were disadvantaged against the country's biggest carrier NTT Docomo.

Also similar to the situation Japan is the fact that, despite this drawback, the iPhone is still a popular brand. China Mobile has over 15 million iPhone's activated unofficially using its 2G network. The company is not discouraging this, even giving advice and instructions for using the phone on the network.

Even before the iPhone was officially available in China many were already importing it, and the crowds at the smartphones initial release were so big that they were forced to shut down the stores for fear of losing control of them.

Interestingly, a recent report from Chinese search engine Baidu suggests that the iPhone has the most active web users in China. Despite being a comparatively small number of users, Baidu's findings reveal that iPhone users are four times more active online then any other device.

What this means for the iPhone's future in China remains to be seen, but it definitely has a following. If Apple were to successfully partner with China Mobile, it could become be a serious competitor for Samsung.

Image source: Elizabeth Phung/Flickr.

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Topics: iPhone, Mobility, China

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9 comments
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  • Wait for Nokia...

    Wait for Nokia.. and the equation will change soon, both apple/samsung, currently under cat fight across continents, will be pushed aside.
    owllnet
    • Rightfully so

      Nokia has made commitment to make Windows Phones for China Mobile.
      illegaloperation
  • Oh, Hana-pageview trolling again?

    OK, so Apple partnering with 2 carriers hurts Apple's ability to flood the Chinese market with cheap phones. Of course, Apple was [b]never[/b] going to do [i]that[/i] so does it really matter? Also, let's not forget that Apple had to cancel the iPhone 4S launch at Apple stores, [b]by order of Chinese police[/b] because the crowds were too large and unruly (source: http://arstechnica.com/apple/news/2012/01/we-told-you-so-chinese-iphone-4s-launch-turns-into-egg-throwing-melee.ars). I'm sure the Nokia Windows Phone launch will have similar crowds[b]-not![/b]. Plus, you can't discount those [b]15 million[/b] grey-market, and [i]totally unsubsidized[/i], 2G iPhones. Which leads me to the final point, in the handset game, it's all about margin. Selling tons of cheap phones that you don't make any money on isn't really a good thing. Apple is selling millions of expensive fully-subsidized iPhones in China, and will do so, in ever-increasing numbers, for the foreseeable future.
    matthew_maurice
    • Whose the troll? Oh that's right you are!

      You clearly haven't read the article since most of the what you mention is actually present. This is defamatory to the writer and the article. I believe you are making insensitive and incredibly biased accusations against the writer because you are probably a strong fan of Apple. Please be careful with your wanton remarks of trolling when it is you has incited the "trolling" position.
      silicon_salami
  • Yes they are

    They are failing because of their pricing.
    slickjim
    • They are not failing: the data is from Q4 when Apple had only one carrier ..

      ... and did not have iPhone 4S selling.

      So [b]the headline of this blog entry is sensationalistic[/b].
      DDERSSS
      • She's actually on your side with this one Apple Boi:

        I don't think you really grasped this article, and I think you may have jumped the gun with your 'sensationalist' shtick:
        1. The headline is positioned as a question not a statement - most likely it is actually questioning the many different articles that have been written on this same topic that ARE sensationalist in their headline e.g. :

        The Register http://www.theregister.co.uk/2012/03/12/china_mobile_apple_3g/
        Value walk:
        http://www.valuewalk.com/2012/03/samsung-beating-apple-in-china-battle/#.T17zUoHxquI
        Social Barrel:
        http://socialbarrel.com/apple-iphone-thrashed-in-market-share-by-samsung-smartphones-in-china/33430/

        2. And of course because you know of the other MORE sensationalist articles and because you thoroughly read this article, you are aware that this more of a balanced and sceptical posting on the same news that has been running the mill. And since you know this, I'm clearly not telling you. Because you know this already, because you read the article.
        Rdelaroza
  • Apple can win sales in China while losing global smartphone platform war

    I'm visiting China now and clearly the iPhone is very well known and popular here. Apple is going to continue to sell LOTS of them here. It's a great device, and affluent customers here, as elsewhere, like its UI, specs, smartphone utility and the brand attributes (cool factor, innovative patina and, even more than elsewhere, here the iPhone is a status symbol). But the barrier to mass adoption (relative to the PRC market, not just raw numbers which will be substantial b/c China is so big and has plenty of rich people now) isn't carrier adoption. Typically phones here are NOT lashed to carriers. People are used to buying unsubsidized phones first, then buying carrier service. (How lovely this would be if it were the US model!) Thus the critical barrier to mass iPhone adoption is consumer choice, not carrier adoption, and in China consumer choice is at the mass level still very price sensitive. iPhones cost 5000-7000 RMB (USD 650-1000). For many of China Mobile's 100s of millions of customers that is still a month or even half year's worth of salary. Too much. The low end of the market won't buy smartphones, but a huge middle swath is going to go for smartphone functionality at a lower price point. Thus I predict Apple's sales will rise in China but the real story will be how Android flourishes in the smartphone / tablet space here because of its proliferation on multiple devices--different sizes, feature mixes and most critically a broader range of prices. People here considering an iPhone look @ Android phones with similar specs (Samsung, HTC, etc all have smartphones with similar specs) but people here looking for a smartphone generically and needing a lower price will consider the Huawei Sonic, an Android device available for USD 157! People looking at iPads may consider the competing devices from Samsung, Acer, etc., but the masses of tablet seekers will look at say the 7" Lonovo A1 which is quite decent and again just USD 157. Apple has nothing on offer at these prices. Sure iPads and iPhones are technically better with a more polished UI, better cameras and richer screens, but for price conscious middle class PRC consumers, somewhat degraded specs for much more diminished price (when they get at least decent and probably substantially equivalent functionality) is a deal many will take. Plus part of the iOS appeal/premium value is in the iTunes store/ecosystem, which isn't as developed here or likely to catch on given the rampant piracy. A bigger Android installed base will further enhance the app ecosystem and create the virtuous circle Apple enjoys with iOS elsewhere. So Apple will likely grow in China, but it risks losing the platform war to a business model that divorces hardware and software and thereby more easily appeals to mass consumers (a story familiar from the Mac/Windows fights). Luxury brands can prosper in China, but it isn't clear that's the most winning strategy for consumer tech here or in the developing world generally, and winning here may provide leverage to some to attack Apple back on it's own turf.
    Heqinsi
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