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Apple falters in China

After months of hype, CEO Timothy D Cook, is joined by China Mobile Chairman, Xi Guohua on Friday in an Apple store in Beijing to less than warm welcome, reports the N.Y. Times Friday.

As the store opened only a dozen people entered to view Apple. As the country’s economy boomed, some other Western brands in China gained a loyal following. From Gillette razors to Walmart stores, American products and companies were generally seen as superior to domestic alternatives, even though many of the products, like iPhones, were assembled in China.

Apple faces a challenge in China with main competitor Samsung and second-largest mobile operator, China Unicom. There are the domestic carriers which the Chinese consumer has turned to for price advantage.

Other issues have risen as the Chinese consumer had tainted meat from Walmart and have chosen to trust local competitors.

‘Apple used to be the must-have, aspirational brand for all wealthy and middle-class Chinese consumers,’ said Shaun Rein, managing director of the China Market Research Group and the author of ‘The End of Cheap China.’ ‘But over the last year, there has been a real deterioration of the Apple brand.’ Apple market share are now in single digits in China.

Microsoft still thrives in China, while Twitter and Facebook have been blocked. Google had found a presence in China as the search engine only to lose to a local rival, Baidu, and scaled back its presence in the country rather than submit to censorship demands. Motorola was once a power in mobile phones in China, but it was supplanted by companies like Nokia of Finland which, in turn, yielded leadership to Apple and Samsung. More recently, Cisco Systems, the maker of telecommunications network equipment, said sales in China had been hurt by disclosures of surveillance by the National Security Agency.

Among consumers who have to pay their own way, however, price has been a big barrier to bringing the iPhone to a broader audience in China. The list price of 5,288 renminbi (about $870) an iPhone in China is more than many people’s monthly salary, especially outside the major cities.

Despite hopes that China Mobile would subsidize pricing it has not happened. To get the iPhone 5S free of charge, subscribers must commit to a two-year contract at 588 renminbi a month.

Due to the pricing situation, consumers go to Hong Kong for smuggled copy versions. ‘The model is the same,’ one contributor wrote on the Sam Weibo blog, ‘I want the cheaper one.’

An Apple spokeswoman, Carolyn Wu, declined to comment on the first-day sales figures.

Analysts say Apple could probably broaden its potential market in China by making phones with features that appeal more to Chinese consumers, like bigger screens. Handsets like the Samsung Note 3, which has a 5.7-inch screen, compared with the 4-inch screen of the Apple 5S and 5C, have been selling well in China.

Tim Cook’s response, ‘We never talk about future things.’ Mr. Cook stated Apple strategy, ‘We have great things we are working on but we want to keep them secret. That way you will be so much happier when you see it.’

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