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Apple Gives China a Long, Hard Look

By Rachelle Dragani MacNewsWorld ECT News Network
Jan 9, 2013 5:00 AM PT

In a market as fiercely competitive as the mobile device market, one company's good fortune could mean trouble for another, meaning Samsung's high expectations for its fourth quarter could come at Apple's expense.

Apple Gives China a Long, Hard Look

Samsung previewed its fourth quarter financials this week, expressing optimism that smartphone sales will help deliver another record quarter. The news comes following a series of minor setbacks for Apple, whose stock has been foundering lately, as many analysts are dialing back forecasts for iPhone sales over the holiday shopping season. Consumer Reports recently put the iPhone at the bottom of its list of the top smartphones.

In Apple's other battleground with Samsung, the courtroom, the two have made countless -- and costly -- efforts to suppress the other's sales, although none of the patent fights seem to have made a significant dent in shipment and sales figures.

None of that signals a death sentence for Apple, said John Feland, CEO and founder of Argus Insights. Apple is doing all it can to prevent Samsung's dominance, but the threat is growing, he said.

"When we unpack the user experiences reported by consumers we find that Samsung's combination of performance, design and pricing have made them a global force in consumer electronics," Feland told MacNewsWorld. "Samsung's larger screen sizes on the Galaxy S III and Galaxy Note II have consumers choosing Samsung over the smaller iPhones. Even the bigger screen of the iPhone 5 isn't enough to push customer delight to the levels being reported by the Galaxy Note II."

Chinese Success Stories

The battle against Samsung is driving Apple to strive to become a major player in emerging markets. CEO Tim Cook is visiting China, according to a statement from the Chinese Ministry of Industry and Information Technology. He first visited the country in March 2012 to get a better sense of the massive, and largely untapped, consumer mobile device market there. He also visited a Foxconn factory following allegations of unfair working conditions in the factories where Apple products are made.

Cook is meeting with Chinese officials to discuss industry trends and technology innovation, the ministry reported.

Apple seems to be gaining a following in China, selling 2 million iPhones the first weekend they were available, despite investor concerns that sales would be flat. China's eight Apple retail locations, three of which were added during the past year, are also reportedly doing well.

The brand resonates with a certain consumer set in China, said Michael Stanat, global research executive at SIS International Research and author of China's Generation Y, pointed out.

"If we take BlackBerry as an example, any incumbent in any country should not overlook how market position can rise and fall," Stanat told MacNewsWorld. "China is a market where consumers tend to build relationships with the brands they consume and remain loyal after positive brand engagement. Apple has a strong positioning and emotion connections with its customers."

Looking for a New Deal?

Still, Cook and Apple still have a long way to go before Apple products are the norm in China, said Stanat. For one, the company can reach about 340 million users via the China Unicom and China Telecom networks, but it has not yet secured a deal with the world's largest provider, China Mobile. If Cook is in China to broker such an agreement, it could reach another 100 million or more possible customers.

In addition, although the company's brand resonates with some Chinese consumers, much more affordable smartphones and data plans are readily available in the country, Stanat noted.

"Android can be a competitive threat to Apple there because the pricing market is so very competitive," Stanat pointed out.

Apple did not respond to our request to comment for this story.

Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.

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