Apple facing uphill battle in China despite China Mobile deal

China Mobile's adoption of the iPhone gives Apple a chance to fight for a larger share of the mainland market, but Samsung remains clear leader

PUBLISHED : Wednesday, 15 January, 2014, 3:35pm
UPDATED : Thursday, 16 January, 2014, 9:06am

The world's largest mobile network is ready to offer Apple's iPhone, but while the US technology giant has declared China its biggest future market, it faces an uphill battle to unseat Samsung Electronics and homegrown competitors.

Majority state-owned China Mobile has more than 760 million customers but for years has declined to provide the iPhone as it argued with Apple over commercial terms.

The country's other big mobile telecommunications operators, China Unicom and China Telecom, already stock the product, and China Mobile will join them tomorrow.

Analysts expect the move to boost the number of subscribers for China Mobile, which was recently awarded a government licence for 4G (fourth generation) services, and lift Apple's iPhone sales in China by millions - but in all likelihood it is far too late for the US giant to take the lead.

Although the iPhone commands fanatical devotion from its Chinese fans, South Korea's Samsung rules the smartphone market with a more than 18 per cent share, according to consultancy Analysys International.

Apple sits in eighth place, with a 3.5 per cent share in the third quarter of last year. Six Chinese companies are ahead of it, many offering cheaper phones using Google's Android operating system.

"The domestic high-end smartphone market is much more diversified and competitive now, leaving users more choices," said Wang Jun, an analyst for Beijing-based Analysys.

China Mobile chairman Xi Guohua told a briefing in Beijing on Wednesday that the company had received "multi-millions" of iPhone pre-orders.

Apple chief executive Tim Cook told the same event: "As of this weekend, we will be selling iPhones in more than 3,000 additional locations."

But Kevin Wang, director of China research for consultancy IHS iSuppli, believes that the US company has a tough job on its hands.

"Although co-operation with China Mobile will help boost Apple's sales and market share in China, it's unlikely that its share will rise to among the top three, given the intense competition in China's smartphone market," he said.

"Smartphones that cost about 1,000 yuan [HK$1,280] are the most popular."

In the US, an iPhone 5s with 16 gigabytes of storage retails for US$649, while that same device is US$726 in Hong Kong and US$867 on the mainland through the Apple Store, owing to taxes and other charges.

The higher prices in China have given rise to a flourishing market for smuggled iPhones, eroding official sales in the country. As a result, many China Mobile subscribers have already procured iPhones and use them on its network, though some functions suffer.

Analysts said China Mobile will have to make its pricing attractive to potential subscribers to promote iPhone sales, which could eat into its profits.

China Mobile had yet to announce prices by midday yesterday, despite the imminent launch, but with investors also worried about profitability, its Hong Kong-listed shares have fallen about 4.7 per cent since the Apple agreement was announced late last month.