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Apple’s staying power tested in first decade of iPhone, as strong Chinese rivals emerge

As Apple celebrates the 10th anniversary of the iPhone, CEO Tim Cook says ‘the best is yet to come’. But could China spoil the party?

PUBLISHED : Monday, 09 January, 2017, 8:40pm
UPDATED : Tuesday, 10 January, 2017, 11:21am

Technology giant Apple marked the 10th anniversary of the iPhone on Monday with a promise to again redefine the global mobile phone industry, despite intense rivalry from major Chinese suppliers.

In a statement on Monday, Apple chief executive Tim Cook said the iPhone had “set the standard for mobile computing in its first decade and we are just getting started”.

“The best is yet to come,” said Cook, hinting at the potential of the next iPhone to be launched later this year.

Watch: How the iPhone has changed in 10 years

China’s aggressive new generation of mobile phone brands, however, could spoil those plans.

Shelleen Shum, analyst at eMarketer, said: “Apple is facing stiff competition from Chinese brands like Huawei Technologies, Oppo, Vivo and Xiaomi.”

Shenzhen-based Huawei, the world’s biggest telecommunications equipment manufacturer, has announced a five-year goal to become the global smartphone market leader.

Apple is facing stiff competition from Chinese brands like Huawei Technologies, Oppo, Vivo and Xiaomi
Shelleen Shum, analyst, eMarketer

Before reaching that target, Richard Yu Chengdong, the chief executive at Huawei’s consumer business group, said at last week’s Consumer Electronics Show in Las Vegas that the company was gearing up to unseat Apple as global No 2 smartphone supplier “in the next two years”.

According to Counterpoint Research, Apple had a 12 per cent share of worldwide smartphone shipments in the quarter to September 30, behind Samsung Electronics’ 20 per cent.

Huawei, Oppo, Vivo, Xiaomi and ZTE Corp combined for 29.5 per cent of total smartphone shipments in the same period.

According to eMarketer, mainland China -- the world’s biggest smartphone market -- is forecast to account for 25.2 per cent of the estimated 2.3 billion smartphone users worldwide this year.

Those numbers show just how much the global smartphone market has progressed since Steve Jobs unveiled the original iPhone at the Macworld 2007 conference in San Francisco in January 2007.

In the 10 years since, the iPhone’s revolutionary design and platform for hardware, mobile applications and services integration have been widely emulated. Android mobile phone providers have had varying success since many sell low-priced models to gain market share.

Nomura research analyst Jeffrey Kvaal said in a report last week that Huawei and Oppo devices are gaining share on the mainland, despite the wide availability of the new iPhone 7 in the market.

“Apple is patient in China, as it has found over the years that not all competitors have staying power,” Kvall said. “Thin margins have driven fluctuating success in the past.”

Apple’s greater China market, comprising the mainland, Hong Kong and Taiwan, represents the company’s second biggest market after the Americas.

The iPhone first entered the greater China market in July 2008, when Hutchison Telecommunications Hong Kong made the iPhone 3G available in the city.

China Unicom next introduced the iPhone 3G and 3GS models on the mainland in October 2009. It was followed by China Telecom, which launched the iPhone 4s model in March 2012.

China Mobile, the world’s largest wireless network operator, finally added Apple to its portfolio of smartphone suppliers in time for its roll-out of faster 4G mobile services on the mainland. China Mobile released the iPhone 5s and 5c models in January 2014.

Even with intense competition around the world, Apple remains the most profitable among global smartphone suppliers. In November, Strategy Analytics estimated that Apple generated a record 91 per cent share, or US$8.5 billion, of global smartphone operating profits -- representing earnings before interest and tax -- in the quarter to September 30.