Apple chief executive Tim Cook believes that “over the arc of time” China is a huge opportunity for his pathbreaking company. But time looks to be on the side of rival Samsung Electronics, which has been around far longer and penetrated much deeper into the world’s most populous country.
Apple this week said its revenue in Greater China, which also includes Hong Kong and Taiwan, slumped 43 per cent to US$4.65 billion (HK$36.1 billion) from the previous quarter. That was also 14 per cent lower from the year-ago quarter. Sales were weighed down by a sharp drop in revenues from Hong Kong. “It’s not totally clear why that occurred,” Cook said on a conference call with analysts.
Neither is it totally clear what Apple’s strategy is to deal with Samsung - not to mention a host of smaller, nimbler Chinese challengers.
Today, in the war for what both sides acknowledge is the 21st century’s most important market, Samsung is whipping its American rival. The South Korean giant now has a 19 per cent share of the US$80 billion smartphone market in China, a market expected to surge to US$117 billion by 2017, according to International Data Corp (IDC). That’s 10 percentage points ahead of Apple, which has fallen to 5th in terms of China market share.
Cook said Apple planned to double the number of its retail stores over the next two years - it currently has eight flagship stores in China and 3 in Hong Kong. But, he added, Apple will invest in distribution “very cautiously because we want to do it with great quality.”
Samsung, with a longer history in China, now has three times the number of retail stores as Apple, and has been more aggressive in courting consumers and creating partnerships with phone operators. It also appears to be in better position, over an arc of time, to fend off the growing assault of homegrown competitors such as Lenovo Group, Huawei Technologies and ZTE, former company executives, analysts and industry sources say.
Apple declined requests for comment for this article.