The iPhone drops out of China’s top 5 list

By , Nov 8, 2012

More than ever before, Apple’s iPhone faces relentless competition, namely in markets where Android cheapos are all the rage. China, home to 1.33 billion people, is Apple’s fastest-growing market, amounting to an ever-growing portion of its fortunes. But Apple’s China problem is two-fold. First, the company’s retail presence in such hugely important market leaves a lot to be desired, even with new flagship stores such as the recently introduced massive Beijing outlet. And second, China’s buyers have always been price-sensitive. Outside the elite, folks are picking up inexpensive phones in droves, with local Chinese vendors happily providing low-cost handsets…

According to research firm Canalys (via IDG News Service), Samsung, unsurprisingly, leads the pack with 14 percent market share. Local brand Lenovo came in second with 13 percent market share.

What’s really peculiar, though, is that Yulong Computer Telecommunication Scientific was #3. This local brand largely unknown outside China makes phones marketed under the Coolpad moniker. The devices are often priced below $100 and as such obviously very popular among Chinese buyers.

Food for thought: according to NPD, the market for low-cost phones will double by 2016.

“They are doing especially well from their partnerships with China Telecom and China Mobile this quarter”, said Canalyis analyst Nicole Peng.

The two carriers together have an astounding 850 million mobile customers. Apple sells the iPhone through China Telecom, but has yet to partner with China Mobile, the world’s largest telco.

This is actually the first time Yulong broke into Canalys’ list of top five smartphone vendors in China, pushing Apple as a result. The remaining fourth and fifth place occupy well-known Chinese brands ZTE and Huawei, respectively. Yulong, ZTE and Huawei each command about a ten percent market share.

 


Yulong’s Coolpad N900 is the iPhone’s killer in China.

Apple ranked sixth with an eight percent market share, a one-point drop from the previous quarter.

I brief glance at the rankings reveals the reason local makers pushed Apple out of the top five rankings: all these companies make inexpensive devices and obviously their products are far more appealing to cash-strapped Chinese buyers than Apple’s pricey smartphone.

Peng said as much:

The Chinese vendors are selling their devices at a very low price that can attract first-time smartphone users. Apple’s iPhone is still very expensive and it kind of limits their expansion in the country, when the target audience of where the growth is coming from is at the low-end.

Of course, none of the above is saying that the iPhone is failing in China. The iPhone 5 hasn’t launched there yet (it’s coming soon) and the company’s shipments in the country are growing steadily.

Still, Apple’s prices don’t resonate well with the vast majority of consumers in countries like China, India, Brazil and Russia (collectively known as BRIC). The iPhone being a high-end play continues to limit the iPhone’s prospect in these low-cost markets where inexpensive sub-$100 prepaid handsets rule the landscape.

I really think Apple would be better served with a really affordable iPhone stripped off advanced features, sold contract-free at affordable price points. The high-end market won’t last forever. It’s gonna become saturated at some point and a more flexible iPhone pricing umbrella will be much needed.

Thoughts?

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  • Yujin

    How does it compare to other luxury brands, iPhone cannot be the top phone cause Chinese are very price continues and it is a luxury to have one there.

    • http://www.facebook.com/JayLst Son Lo

      i agree with you.

    • http://twitter.com/HuchongLing Joey_Z

      well, in most Asian countries, there are no such concept as subsidized phone. You can sign up a contract, but you will still have to pay full price for the phone. So, if that’s the case in the US, I guess 600 bucks for a phone is about enough to make most consumers price sensitive.

  • CollegiateLad

    Christian, how long have you followed Apple? Apple chooses its markets – The low cost market isn’t a market Apple chooses to compete in.

    You think Apple would be better served selling a phone stripped of features for cheap?

    How can you say this? Do you realize Apple pockets 90% of mobile profits? This is not by accident. How on earth does selling a phone for dirt cheap benefit Apple more than their current strategy? For the sake of market share? Bragging rights?

  • Eric Armstrong

    Anyone else find it surprising that China’s “iPhone killer” is a phone with a stylus?

    I was under the impression that styluses were a thing of the past (for mobile phones at least, tablets and phablets are a little different story)

  • http://www.facebook.com/khan.rulzz.7 Khan Rulzz

    lack of money !!!!!

  • wadjj

    I’m Chinese and I’ve never seen anyone used the Yulong whatever, a lot of iDownload blog articles about China are just nonsense from random source. And a lot of sources, including some wall street analysts reports are plain ignorant when it comes to China market, if you ask any Chinese, I can bet most of them never heard of Yulong whatever. iPhone is not the number one because it’s expensive and we have to pay upfront, and those twitter/facebook/siri/LTE(damn, most of us are stuck with EDGE and 50/100MB data plan) are just non-features to us. iPhone is a luxury and it runs a lot of games, they’re the top 2 reasons that a Chinese buy it.

    • http://www.facebook.com/Sejo87 Sejad Jr Sejdic

      You know I always imagined China having all these technologies ahead of us, in fact I thought Asia was always more advance then North America in the phone technologies. I guess until Apple got into the whole phone business they were but I still think Samsung and some other well known phone companies are giving Apple a good competition, which is always good to further our self’s when it comes to new technologies.

      • http://twitter.com/HuchongLing Joey_Z

        The only Asian country I can think of that is more advanced in mobile phone than North America is Japan. But that is only limited to hardware and has ended years ago. Making hardware sometimes returns 0 profit. Software is the king. Yet, no country in the rest of the world has something competitive to Android, IOS, and WP…

      • Guest

        Mobile phone wise, for the first sentence…

  • http://twitter.com/HuchongLing Joey_Z

    The survey clearly does not include iPhones that are illegally brought into China.

  • http://twitter.com/JuergenWest Jürgen West

    Apple’s business model is not the low end. They could however continue to sell the 3GS as their cheaper alternative in third world and low income countries like China.