Apple's fading fortune in China likely to continue

The dismal quarterly result in China is more than a warning bell for Apple as the company is now short of methods to further expand its influence in the world's most populated market.
Written by Cyrus Lee, Contributor

Apple's recently announced sales in the Greater China market fell 33 percent to $8.8 billion for the three-month period ending in June, contrasting to the 112 percent gain a year earlier. In the meantime, Chinese technology giant Huawei, which sells most of its mobile phones in its home country, said it is confident to realize a target shipment of 140 million smartphones for the year -- a 30 percent increase in from 108 million units in 2015, after its revenue for the first six months of this year jumped 40 percent to 245.5 billion yuan ($36.9 billion).

Apple's startling quarterly result also suggests that China has lost its crown as the Cupertino firm's largest overseas market. Europe contributed $9.6 billion in revenue to Apple in the quarter, outstripping China's $8.8 billion, having lost the title to China back in the second quarter of 2015. Meanwhile, Huawei supplied one in four new smartphones in the three months through May, which has led the handsets sales in China this year, together with two other local brands, Oppo and Xiaomi.

The Chinese market now is a completely different picture from 2009 when Apple's iPhone made its debut in the country, when local smartphone brands were amateur. Owning an iPhone used to be a big topic among Chinese consumers, especially less well-off youngsters, as the design was unique, the OS special, and the pricetag expensive. But today, iPhones are as commonly seen as any other smartphones in the daily life of Chinese people, whatever their models, either brand new or second hand.

With Apple's new flagship iPhones offering fewer unique features, except the ballooning prices, the number of Chinese consumers who are "irrationally" in pursuit of an iPhone is undoubtedly decreasing. All the while, the mushrooming Chinese local smartphone brands offering cost-effective handsets have successfully won the hearts of many "rational" consumers who are prone to compare them with iPhones.

Taking Apple's lowest-end flagship for instance, a 16G iPhone 6S starts at 5,288 yuan ($794) in China, which is 43 percent pricier in comparison with Huawei's high-end P9 handset. The latter, costing only 3,688 yuan ($554), offers 64GB of storage, and an even better screen, camera, and overall performance, as the company markets.

Apple's China problem is more than just weak iPhone sales. Other product lines such as iPads and Macs are also facing competition from local smartphone brands like Huawei and Xiaomi. In 2015, Huawei unveiled several full-sized Android tablets to challenge Apple's iPad products, with much cheaper pricetags.

Meanwhile, Xiaomi's 64G Windows-powered tablet starts as low as 1,299 yuan ($195), and this week, the company also announced its first laptop, the Mi Notebook Air, which resembles Apple's Macbook Air in both the look and the name, but is priced much lower, at 3,499 yuan ($526) for the 12.5-inch screen and 4,999 yuan ($751) for the 13.3-inch.

Xiaomi offers an even lower threshold for its flagship models. Xiaomi Mi5 32G version, the most inexpensive among the flagship models, is equipped with Snapdragon 820, 4G RAM, 3,000mAh battery, and 16MP rear camera but priced only 1,999 yuan ($300).

Other brands like ZTE and Lenovo are all taking similar approaches to tap savvy Chinese consumers by offering powerfully configured products at very affordable prices. Despite that, their impact remains limited. At least for now.

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