Apple still trying to crack China

15 October 2010

BEIJING: Apple, the consumer electronics giant, is making progress in China but still needs to overcome a number of obstacles.

The latest version of the company's iPhone went on sale in the country on September 25 through a partnership with China Unicom, having received 200,000 pre-orders.

While the gap between rolling out the original iPhone in the US and China surpassed two years, this figure reached just three months regarding the iPhone 4.

Apple has also opened four stores in Shanghai and Beijing, and plans to unveil 25 further sites by the end of 2011.

"We are very excited about China not only for retail but for Apple," Peter Oppenheimer, its chief financial officer, said earlier this year.

Charles Wolf, a Needham & Co analyst, said the world's most populous nation would be an essential outlet for the US multinational going forward.

"It's critical that Apple is in China," he told the San Jose Mercury. "There is a strong move toward conspicuous consumption and that means there is a strong move to buy Apple products."

A 16 gigabyte iPhone currently retails at around $750 (€533; £469) in China and an equivalent iPhone 4 commands $880, far beyond the salaries of many shoppers.

Shaun Rein, managing director of the China Market Research Group, suggested subscribers often send text messages rather than making costly voice calls.

"They use the iPhone as a status symbol to show their sophistication in the world, even though they can't afford it," he added.

"Apple has great products the whole world wants," Rein continued. "But Steve Jobs looks at America too much. The company is too Ameri-centric. This is a complaint you hear throughout the world."

Sandy Shen, an analyst at Gartner's Shanghai office, similarly warned this was a substantial failing.

"Apple hasn't learned how to tackle markets that have very different characteristics from the United States," said Shen.

Broader challenges facing the organisation include the widespread availability of "shanzhai", or fake handsets, and rising competition from devices using Google's Android operating system

Such a trend particularly applies to tablets, and Gene Munster, senior research analyst at Piper Jaffray, predicted Apple's iPad - also introduced in China last month - may fall behind its biggest rival globally.

"Ultimately, we think that Apple won't have the majority of the market share. It'll probably be with Android-based tablets," he said.

Data sourced from San Francisco Chronicle/San Jose Mercury; additional content by Warc staff