Is Apple struggling in China?

Brand News #1

Yes Apple is indeed struggling with its iPhone sales in China

The company’s revenue dropped 13% YOY, from $12.5 billion to about $10.7 billion. This has greatly offset the sales increase that Apple has made in the geographic regions such as Americas, Europe, Japan and rest of Asia-Pacific. What’s more interesting is that as per Apple’s latest quarterly reports, its iPhone business makes up about 63% of company’s net revenue and 67% over the past 6 months.

Now why could Apple be experiencing such dismal results in a country that Apple CEO Tim Cook once predicted would be the company's largest market.

Tough competition could be the single largest contributing factor as to why Apple iPhones are not making such inroads in the Chinese market. Apple has faced intense competition in the China smartphone market for quite some time and has only gotten really tough over the years. Companies such as Xiaomi, OPPO, Vivo, and Huawei are aggressively attacking this market by trying to offer devices that are packed to the brim with features while selling them at relatively low prices.

Apple's current iPhone models are certainly no pushovers when it comes to hardware quality and engineering. According to me, iPhone 7 Plus is probably the best smartphone in the world, all things considered. But I don't think that quality internal features and engineering are enough to really stand out in China's smartphone market which is extremely price sensitive.

For example, while Apple has largely stuck to the same basic shape for its iPhone models for three years, local China-based smartphone makers have been experimenting with their flagship devices both visually and aesthetically by adding features such as curved OLED displays, smartphones with high screen-to-body ratios, alternative form factors and materials, such as ceramic.

Other than putting out smartphones that are more visually appealing than the now three-year-old design Apple has continued to sell, the smartphones sold by local Chinese brands also seem to have another advantage, which is price.

Another part of Apple's problem in China is that mid-range and even low-end smartphones are quickly becoming "good enough" for many users. And Apple doesn't really participate at those lower price points and hence Apple's market share in these price points are suffering.

But here is what Apple can do to remedy its issues in China, Apple's best bet is to put out products so compelling that they help Apple grab share within the high-end smartphone market within Greater China and that are so compelling they help to grow the high-end market.

To elucidate further, if a customer looks at an expensive iPhone and a much cheaper mid-range phone and decides that is not worth shelling out the extra for the iPhone when that mid-range device will do the job well enough and possibly offers a similar look and feel, that's a loss for Apple.

If Apple can build devices that are so unique and feature-rich that a customer simply wants the expensive iPhone even though the mid-range one will perform adequately -- in other words, if it can make what amounts to "luxury" smartphones that might be viewed as status symbols in China-- then the company could revive its iPhone sales performance in Greater China and even accelerate its iPhone results in the rest of the world.