Why is China Struggling to Embrace the iPhone?
Beloved and idolized by legions of followers across the globe, Apple’s flagship iPhone 4S is struggling to ignite enthusiasm in the company’s second biggest market – China. Make no mistake, there’s a hardcore Apple fanbase in the country. Stories abound of people paying smugglers huge sums of money to get their hands on the latest gadgets before they officially hit the shelves in Apple’s five stores in Shanghai and Beijing. The first quarter of the year was indeed monumental for Apple, but things are starting to change.
According to the New York Times, Apple’s quarterly revenue in March of this year in China totaled a resounding $7.9 billion. Senior management were still patting each other on the back, expecting more of the same, when results for the second quarter left them flabbergasted. Figures released in June showed that earnings in China dropped sharply to $5.7 billion, ramping up pressure on Apple’s Asian shares.
Observers quickly came to the conclusion that the iPhone 4S simply wasn’t hip or fancy enough to last in the Chinese market, in the face of competition from other companies such as Samsung, with their Galaxy SIII. The iPhone 4S’ design remains unchanged from the iPhone 4, released over two years ago. Samsung, in comparison, are releasing slimmer phones with larger screens, packed with exciting features. Statistics show that worldwide iPhone sales also dropped slightly between the first and second quarters of this year. It is entirely feasible that people worldwide, including the Chinese are waiting for the next generation of the iPhone, rumored to be unveiled in mid-September. As a result, demand for the iPhone 4S has suddenly slumped.
Reuters have reported that Apple CEO Tim Cook placed the blame on ‘changes in the inventory channel’. This basically means that Apple had built up a huge level of inventory in the first three months of the year, negating the need for retailers to order more devices. Therefore, poor sales were not a factor. Some observers disagree with this assessment however, pointing out that the iPhone is not entirely suited to the Chinese market, due to limitations involving features and networking.Continued on the next page